Day 1 Recap of NCUA Meeting: Proposed, Temporary, Final Rules

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The National Credit Union Administration (NCUA) Board — which included Kyle Hauptman, who was sworn into his seat earlier this week — held the first of two consecutive open meetings today.

The board issued three proposed rules, a temporary final rule, and a final rule. Here are the following issues:

Proposed Rule: Field of Membership Shared Facility Requirements (Part 701, Appendix B)
Amends the chartering and field of membership (FOM) rules to modernize requirements related to service facilities for multiple common bond (MCB) federal credit unions (FCUs). The proposal would amend the rules to include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for an FCU that participates in a shared branching network. The FCU would not need to be an owner of the shared branch network for the shared branch or shared ATM to be a service facility. These changes would apply to the definition of service facility both for additions of select groups to multiple common bond FCUs and for expansions into underserved areas. Vote 2-1; Board Member Harper dissenting.

Temporary Final Rule: Regulatory Relief in Response to COVID-19 (Part 701)
Extends the effective date of the NCUA’s temporary final rule (adopted in April 2020) that modified certain regulatory requirements to help ensure that federally insured credit unions (FICUs) remain operational and can properly conduct appropriate liquidity management to address economic conditions caused by the pandemic. Specifically, the temporary final rule:

  • Raised the maximum aggregate amount of loan participations that a credit union may purchase from a single originating lender to the greater of $5,000,000 or 200 percent of the credit union’s net worth.
  • Suspended limitations on the eligible obligations that a FCU may purchase and hold.
  • Tolled the required timeframes for the occupancy or disposition of properties not being used for FCU business or that have been abandoned.

The board extended the effective period of these temporary modifications until Dec. 31, 2021.

Proposed Rule: Mortgage Servicing Rights (Parts 703 & 721)
Amends the NCUA’s investment regulation to permit FCUs to purchase mortgage servicing rights (MSRs) from other federally insured credit unions subject to the following conditions:

  • The underlying mortgage loans of the MSRs are loans the FCU is empowered to grant;
  • The FCU purchases the MSRs within the limitations of the FCU’s board of directors’ written purchase policies; and
  • The board of directors or investment committee approves the purchase in advance.

Vote 2-1; Board Member Harper dissenting.

Proposed Rule: Overdraft Policy (Part 701)
Amends one of the requirements that a FCU must adopt as a part of its written overdraft policy. Specifically, the proposal would modify the requirement that a FCU’s written overdraft policy establish a time limit, not to exceed 45 calendar days, for a member to either deposit funds or obtain a loan from the FCU to cover each overdraft. The proposed rule would replace the 45-day limit with a requirement that the written policy establish a specific time limit that is both reasonable and applicable to all members, for a member either to deposit funds or obtain a loan from the credit union to cover each overdraft. Vote 2-1; Board Member Harper dissenting.

Final Rule: Subordinated Debt (Parts 701, 702, 709, & 741)
Amends various parts of the NCUA’s regulations to permit Low-income Designated Credit Unions, Complex Credit Unions, and New Credit Unions to issue Subordinated Debt for purposes of Regulatory Capital treatment.

The final rule—being adopted largely as proposed—includes a few changes based on comments, including:

  • Amending the definition of Accredited Investor;
  • Providing a longer timeframe in which a credit union may issue Subordinated Debt after approval;
  • Reducing the required number of years of Pro Forma Financial Statements an Issuing Credit Union must provide with its application;
  • Clarifying the prohibition on Subordinated Debt issuances outside of the United States, and
  • Clarifying that the board will publish a fee schedule only if it makes a determination to charge a fee.

The final rule will become effective Jan. 1, 2022.

The board was also brief the National Credit Union Share Insurance Fund’s (NCUSIF’s) normal operating level for 2021 and recommended the level remain unchanged at 1.38 percent.

You can view today’s board agenda here.

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