More CU Giants Qualify For Low-Income MBL Exemption

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ALEXANDRIA, Va. – NCUA on Friday reported it has approved another 69 credit unions for its low-income designation – including dozens of the nation’s biggest credit unions – enabling them to skirt congressional limits on member business loans and to raise secondary capital, as enabling legislation in Congress appears dead.

Among the new low-income designees are several billion-dollar credit unions, including Mountain America CU, Redwood CU, University of Iowa Community CU, Vantage West CU, ORNL FCU, Tennessee Valley FCU, and several nearing the $1-billion mark, such as IH Mississippi Valley CU, Arkansas FCU, Fibre CU and Indiana University FCU.

The low-income designation will exempt those credit unions from the 12.25% of assets limit on MBLs, which credit unions have been lobbying Congress to raise, allow them to issue non-member deposits and to raise secondary capital and count it as net worth under NCUA’s minimum capital rules known as prompt corrective action, or PCA. The low-income designation also makes a credit union eligible to participate in NCUA’s low-interest community development loans and technical grants program.

Cognizant of the congressional stalemate over the MBL and secondary capital bills, for the past two years NCUA has campaigned to solicit credit unions to apply for the low-income designation, which requires that more than half of a credit union’s field of membership earn less than the median U.S. income, a standard easily met by hundreds of credit unions that have added underserved communities to their charters over the past decade. The campaign has allowed NCUA to add 1,000 credit unions to its low-income lost, doubling the total in little more than a year.

“We launched NCUA’s low-income credit union initiative one year ago, as part of my Regulatory Modernization Initiative,” said NCUA Chairman Debbie Matz, in a recent announcement of the anniversary of the initiative. “To relieve federally chartered credit unions of the burden of determining if more than 50% of their members met the definition of low income, NCUA performed the analysis and then informed the qualifying credit unions.”

Matz announced the initiative Aug. 7, 2012. The agency sent letters to more than 1,000 credit unions, notifying them of their eligibility and informing them of the streamlined application process, essentially pre-qualifying them for the low-income designation and asking if they would like to accept.

NCUA’s move came as Congress remains unwilling to pass an MBL bill or secondary capital legislation, both of which have languished on Capitol Hill for more than a decade.

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