NCUA Likely To OK Expanded MBL

Register now

The NCUA board is expected to vote a final rule in September which will make it easier for credit unions to expand their member business lending.

JoAnn Johnson, vice chair of the NCUA Board, who chaired an internal task force crafting the proposal, told credit union executives gathered here for NAFCU's annual convention, there are three main aims of the proposal.

They are: to encourage more business lending by credit unions; ease the restrictions on MBLs imposed in HR 1151, the CU Membership Access Act, and, above all, make more capital available to credit union members seeking to finance their own businesses.

Johnson said credit union participation in business lending is still negligible, with only 16% of credit unions having some kind of business loan program. And the average MBL is only $98,000, making the market for such small business loans unattractive for banks and other commercial lenders. "This is an opportunity to serve your members without having to sacrifice the safety and soundness of your credit union," she said.

Many credit unions, she noted are already expanding their business lending programs, as evidenced by the addition of 22 credit unions to the U.S. Small Business Administration's guaranteed loan program, most of them since the February ruling expanding membership eligibility for credit unions. By the end of June 100 credit unions had qualified for the SBA program, according to Johnson.

Among the provisions she expects to be in the final rule voted on in September are those not counting loans sold with recourse or portions of loans sold through participations against HR 1151's 12.25% (of assets) cap on MBLs; an allowance for 100% financing for vehicles used for businesses; and greater flexibility in documenting different types of MBLs.

Johnson, who is expected to be named NCUA chair after a successor to replace outgoing Chair Dennis Dollar is confirmed, also called on credit unions to plan for their own succession of senior management. "I challenge you; are you preparing the next generation for succession," she asked. "If not, you could be placing your management at a disadvantage for years to come."

"Succession issues are sensitive, but they must be addressed," said Johnson. "Boards need to provide thoughtful consideration for the long-term viability of their credit union."

For reprint and licensing requests for this article, click here.