Markets Wired

Successful Lending Requires Right People, Processes and Policies

ALEXANDRIA, Va. (March 14, 2016) – Credit unions can learn more about the advantages of member business lending in a video released today by the National Credit Union Administration.

The video, available here (opens new window), outlines the elements of an effective member business lending program. The video also highlights how member business lending, if managed correctly, could benefit credit unions, their members and their communities. A key factor in successful lending is having the right people, processes and policies in place to ensure safety and soundness.

Credit unions will have greater latitude to make commercial lending decisions under a member business lending final rule (opens new window)unanimously approved by the NCUA Board at its February open meeting. The final rule permits credit unions to tailor their member business lending programs to fit their strategic goals and their members’ needs. Key changes in the final rule include:

• Giving credit union loan officers the ability, under certain circumstances, to not require a personal guarantee;
• Replacing explicit loan-to-value limits with the principle of appropriate collateral and eliminating the need for a waiver;
• Lifting limits on construction and development loans;
• Exempting credit unions with assets under $250 million and small commercial loan portfolios from certain requirements; and
• Affirming that non-member loan participations do not count against the statutory member-business lending cap.

Most of the provisions of the final rule become effective Jan. 1, 2017. Removal of the personal guarantee requirement is effective 60 days after publication in the Federal Register. (opens new window)

At any time, credit unions may access NCUA’s Small Business Lending Resource page for detailed information about the agency’s member business lending rules and regulations, supervisory guidance, links to the Small Business Administration’s loan programs and related articles from The NCUA Report, the agency’s flagship publication.