NCUA Lending Requirements (Ch. 3)

Question 1

Maturity limitations

Answer 1

1. 15 Years (General)
   - If the loan does not qualify for a 20 or 40-year maturity
2. Up to 20 Years (Second mobile home)
   - Purchase of a mobile home if used as the member’s residence
   - 2nd mortgage loan if the loan is secured by a residential dwelling
   - Loan to refinance the repair, alteration, or improvement of a residential dwelling
3. Up to 40 Years
   - Residential real estate loan
   - Perfected first lien on 1-to-4 family dwelling that is or will be the primary residence of the member
   - Standard loan application form
   - Standard security instrument and note

Question 2

Loan Incentive Programs

Answer 2

• Generally, no FCU official or employee may receive any commission, fee, or other compensation in connection with any loan made by the credit union

Exceptions:

• Payment, by a federal credit union, of an incentive or bonus to an employee based on the credit union’s overall financial performance
• Payment, by a federal credit union, of an incentive or bonus to an employee, other than a senior management employee, in connection with a loan (or loans) made by the credit union, as long as the federal credit union’s board of directors establishes written policies and internal controls in connection with the incentive/bonus program and monitors compliance with those policies and controls at least annually.

Question 3

Nonpreferential Treatment

Answer 3

Rates for officials must not be more favorable than comparable loan rates to other credit union members

Question 4

What is a member business loan (MBL)?

Answer 4

Loans secured by a vehicle manufactured for household use and will be used for a commercial, corporate, or agricultural purpose.

Exceptions:

• Loans which a federal or state agency will insure, guarantee, or commit to buy
• Nonmember commercial loans or nonmember participation interests in commercial loans

Question 5

What are the concentration limits in NCUA’s lending rules?

Answer 5

10% of total unimpaired capital and surplus

Question 6

How do NCUA regulations limit loans and loan-related compensation to credit union’s board of directions or other officials?

Answer 6

Generally, no official or employee may receive any commission, fee or other compensation in connection with any loan made by the credit union.

Board approval required for application in which an official is a direct obligor, endorser, cosigner or guarantor if A-B>$20K

Question 7

Board Approval Calculation

Answer 7

A-B > $20K

A is the sum of:
– Amount of application
– Outstanding balances of loans, including the used portion of an approved line of credit, extended to or endorsed, cosigned or guaranteed by the official
– Total unused portion of approved lines of credit extended to or endorsed, cosigned or guaranteed by the official

B is the sum of:
– The amount of shares pledged by the official on
loans or lines of credit extended to or endorsed,
cosigned or guaranteed by the official
– The amount of shares to be pledged by the official
on the loan or line of credit applied for by the
official

Question 8

Permissible Compensation

Answer 8

• Employee salaries
• Employee incentive or bonus based on FCU’s overall financial performance
• Employee incentive or bonus in connection with loan subject to BOD established written policies and internal controls (does not apply to senior management employees; must be monitored annually)
• Service performed outside the credit union with no referral by FCU (applies to officials & non-senior management employees)