NCUA Enacts New Limits On IndirectOutsourcing

ALEXANDRIA, Va. - (06/23/06) -- The NCUA Board voted Thursday to putnew limits on outsourcing of indirect lending programs tothird-party vendors. Concerns about potential losses in indirectprograms prompted the new rule which will limit the amount ofoutsourced loans a credit union may have with any one servicer to50% of net worth for the first 30 months, then 100% of net worththereafter. Credit unions that have strong indirect programs mayobtain a waiver from the new limits through NCUA regional offices.The limits do not apply to servicers that are owned by federallyinsured financial institutions, such as CUSOs, which have similarrisk and underwriting standards as federally insured credit unions.Credit unions currently over the threshold will not be required todivest any of their loans but will not be able to make any newloans through that servicer until their portfolio is amortized downbelow the new threshold or must obtain a waiver.