ALEXANDRIA, Va. – NCUA ruled that a line of credit provided by a credit union to a mortgage company is not exempt and thus qualifies as a member business loan under the agency’s MBL rules.
Lawyers for an unnamed New York credit union had asked the agency for a legal opinion hoping that because the mortgage company will be assigning liens on one-to-four family dwellings to secure the line of credit that the line would qualify under an exception from the MBL rule. “The [credit union] is lending to the company and this exception applies where the dwelling is the primary residence of the borrower,” NCUA said in the requested legal opinion.
The proposed line of credit, said NCUA, does not qualify for the MBL exception excluding loans fully secured by a lien on a one-to-four family dwelling that is the borrower’s primary residence. “The term ‘borrower’ in the exception refers to the MBL borrower and not the person without an obligation to the [credit union] under the MBL rule. Even if the company’s homebuyers are [credit union] members, they are not borrowers under the MBL, but a separate loan agreement with the company,” said NCUA.
The homebuyers are not obligated to repay the MBL and assignment of the homebuyer’s note and mortgage as collateral does not qualify the line of credit for an MBL exception.
