[Federal Register Volume 84, Number 57 (Monday, March 25, 2019)]
[Rules and Regulations]
[Pages 10971-10976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05186]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 84, No. 57 / Monday, March 25, 2019 / Rules
and Regulations
[[Page 10971]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AE88
Loans to Members and Lines of Credit to Members
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The NCUA Board (Board) is amending its regulations regarding
loans to members and lines of credit to members to reduce regulatory
burden, improve clarity, and make compliance easier. The amendments
make the NCUA's regulations more user friendly by identifying in one
section all of the various maturity limits applicable to federal credit
union (FCU) loans, stating that the maturity date for a new loan under
generally accepted accounting principles (GAAP) is calculated from the
origination date of the new loan, and more clearly expressing the
limits for loans to a single borrower or group of associated borrowers.
DATES: The effective date for this rule is April 24, 2019.
FOR FURTHER INFORMATION CONTACT: Thomas I. Zells, Staff Attorney,
Office of General Counsel, at 1775 Duke Street, Alexandria, VA 22314 or
telephone: (703) 548-2478.
SUPPLEMENTARY INFORMATION:
I. Background
II. Final Rule and Summary of Comments
III. Section-by-Section Analysis
IV. Legal Authority
V. Regulatory Procedures
I. Background
In August 2017,\1\ the Board published and sought comment on the
NCUA Regulatory Reform Task Force's (Task Force) first report on
implementing the agency's regulatory reform agenda (Agenda). The Agenda
identifies those regulations the Board intends to amend or repeal
because they are outdated, ineffective, or excessively burdensome.\2\
The Board published the Task Force's second and final report in
December 2018.\3\ The final report contains the Task Force's updated
recommendations and a refined blueprint for implementing the Agenda.
---------------------------------------------------------------------------
\1\ 82 FR 39702 (Aug. 22, 2017).
\2\ This is consistent with the spirit of the President's
regulatory reform agenda and Executive Order 13777. Although the
NCUA, as an independent agency, is not required to comply with
Executive Order 13777, the Board has chosen to comply with it in
spirit and has reviewed all of the NCUA's regulations to that end.
\3\ 83 FR 65926 (Dec. 21, 2018).
---------------------------------------------------------------------------
A number of the items in the Agenda relate to the NCUA's
regulations on loans to members and lines of credit to members.\4\ The
Board issued a proposed rule in August 2018 to address those items and
to request further public comment on other issues.\5\ More
specifically, the Board proposed changes to make the NCUA's regulations
more user friendly by: (1) Identifying in one section the various
maturity limits applicable to FCU loans; (2) clarifying that the
maturity for a ``new loan'' under GAAP is calculated from the new date
of origination; \6\ and (3) more clearly expressing the limits in place
for loans to a single borrower or group of associated borrowers. The
Board also sought advanced comment on: (1) Whether the NCUA should
provide for longer, more flexible maturity limits for certain loans as
permitted by section 107(5)(A)(i)-(ii) of the FCU Act; and (2) whether
the NCUA should establish a single universal limit for loans to a
single borrower or group of associated borrowers in lieu of the current
system of having various limits depending on the type of loan.\7\
---------------------------------------------------------------------------
\4\ 12 CFR 701.21.
\5\ 83 FR 39622 (Aug. 10, 2018).
\6\ GAAP is defined as generally accepted accounting principles
in the United States as set forth in the Financial Accounting
Standards Board's (FASB) Accounting Standards Codification (ASC).
\7\ The proposal sought advanced stakeholder comment on these
related issues to help the Board determine what, if any, changes the
agency should consider proposing in the future.
---------------------------------------------------------------------------
For the reasons discussed below, the Board is adopting the proposed
rule largely as proposed. The NCUA is also continuing to evaluate the
comments received on the issues for which it sought advanced comment.
Any regulatory amendments that the Board decides to propose based on
the advanced comments will be done through the NCUA's normal notice and
comment rulemaking process to comply with the Administrative Procedure
Act (APA).\8\
---------------------------------------------------------------------------
\8\ 5 U.S.C. 551 et seq.
---------------------------------------------------------------------------
II. Final Rule and Summary of Comments
The NCUA received 31 comments on the proposed rule. Those comments
generally fell into three categories: (1) Comments addressing the
technical and clarifying changes the NCUA specifically proposed; (2)
comments addressing the issues on which the NCUA sought advanced
comment; and (3) comments addressing subjects outside the scope of the
proposed amendments. Commenters were overwhelmingly supportive of the
technical and clarifying changes that the proposal made with no
commenters generally opposing the proposed changes. As stated above,
the Board is finalizing these changes largely as proposed.
The majority of commenters heavily focused on the issues on which
the NCUA sought advanced comment, namely: (1) Potential alternate
maturity limits; and (2) a potential universal limit on loans to one
borrower. The Board reiterates that the proposal sought advanced
stakeholder input on these topics with an eye toward making future
regulatory amendments. Any future changes related to this request for
advanced comment will be done through the NCUA's normal notice and
comment rulemaking process to comply with the APA. It is worth noting
that, as a general matter, commenters expressed confusion about the
maturities applicable to various types of loans and the NCUA's
authority to alter them. Commenters also addressed a number of issues
that were largely unrelated to the issues on which the proposal sought
comment. The Board will continue to evaluate these comments, but notes
that such unrelated comments are outside the scope of this rulemaking
and would require separate future action.
A. Loan Maturity Limits for Federal Credit Unions
Section 107(5) of the Federal Credit Union Act (FCU Act) grants
FCUs the power ``to make loans, the maturities of which shall not
exceed 15 years, except
[[Page 10972]]
as otherwise provided herein.'' \9\ The NCUA implemented this general
maturity limit in Sec. 701.21(c)(4) of its regulations. Sections
107(5)(A)(i)-(iii) of the FCU Act provide exceptions to the general 15-
year maturity limit, which have been implemented in Sec. 701.21(e)
through (g) of the NCUA's regulations.
---------------------------------------------------------------------------
\9\ 12 U.S.C. 1757(5).
---------------------------------------------------------------------------
Section 107(5)(A)(i) of the FCU Act, implemented in Sec. 701.21(g)
of the NCUA's regulations, states that ``a residential real estate loan
on a one-to-four-family dwelling, including an individual cooperative
unit, that is or will be the principal residence of a credit union
member, and which is secured by a first lien upon such dwelling, may
have a maturity not exceeding thirty years or such other limits as
shall be set by the National Credit Union Administration Board (except
that a loan on an individual cooperative unit shall be adequately
secured as defined by the Board), subject to the rules and regulations
of the Board.'' \10\ Pursuant to its authority in section 107(5)(A)(i)
of the FCU Act to set alternate maturities for covered 1-4 family real
estate loans, the Board has established a 40-year maximum maturity for
such loans and has provided that longer periods may be permitted by the
Board on a case-by-case basis.\11\
---------------------------------------------------------------------------
\10\ 12 U.S.C. 1757(5)(A)(i) (emphasis added); 12 CFR 701.21(g).
\11\ 12 CFR 701.21(g)(1) (stating that ``[a] federal credit
union may make residential real estate loans to members, including
loans secured by manufactured homes permanently affixed to the land,
with maturities of up to 40 years, or such longer period as may be
permitted by the NCUA Board on a case-by-case basis, subject to the
conditions of this paragraph'').
---------------------------------------------------------------------------
Section 107(5)(A)(ii) of the FCU Act, implemented in Sec.
701.21(f) of the NCUA's regulations, states that ``a loan to finance
the purchase of a mobile home, which shall be secured by a first lien
on such mobile home, to be used by the credit union member as his
residence, a loan for the repair, alteration, or improvement of a
residential dwelling which is the residence of a credit union member,
or a second mortgage loan secured by a residential dwelling which is
the residence of a credit union member, shall have a maturity not to
exceed 15 years or any longer term which the Board may allow.'' \12\
Pursuant to its authority in Sec. 107(5)(A)(ii) to set alternate
maturities for covered loans, the Board has established a 20-year
maximum maturity for such loans.\13\
---------------------------------------------------------------------------
\12\ 12 U.S.C. 1757(5)(A)(ii) (emphasis added); 12 CFR
701.21(f).
\13\ 12 CFR 701.21(f)(1) (stating that ``[n]otwithstanding the
general 15-year maturity limit on loans to members, a federal credit
union may make loans with maturities of up to 20 years'' for loans
covered by this paragraph.).
---------------------------------------------------------------------------
Finally, section 107(5)(A)(iii) of the FCU Act, implemented in
Sec. 701.21(e) of the NCUA's regulations, states that ``a loan secured
by the insurance or guarantee of, or with advance commitment to
purchase the loan by, the Federal Government, a State Government, or
any agency of either may be made for the maturity and under the terms
and conditions specified in the law under which such insurance,
guarantee, or commitment is provided.'' \14\
---------------------------------------------------------------------------
\14\ 12 U.S.C. 1757(5)(A)(iii); 12 CFR 701.21(e).
---------------------------------------------------------------------------
i. Identifying the Various Maturity Limits in One Section
Section 701.21 of the NCUA's regulations addresses various loan
maturity limits in paragraphs (c), (e), (f), and (g). Paragraph (c)
provides the general rules applicable to all loans to members and,
where indicated, all lines of credit (including credit cards) to
members, except as otherwise provided in the remaining provisions of
Sec. 701.21. Paragraph (c)(4) implements the general 15-year maturity
limit that Sec. 107(5) of the FCU Act places on loans to members.
Paragraphs (e), (f), and (g) of Sec. 701.21 implement the three
exceptions to this general 15-year limit that appear in section
107(5)(A)(i)-(iii) of the FCU Act.
Having the various maturity limits spread among numerous sections
of the NCUA's regulations, often separated by large amounts of
regulatory text unrelated to maturities, can be confusing to a reader
and makes it more difficult to understand the lending regulations. To
remedy this, in the proposed rule, the Board proposed to make the
NCUA's loan maturity requirements more understandable and user friendly
by identifying in one section (Sec. 701.21(c)(4)), including cross-
citations, all of the maturity limits applicable to FCU loans.
More than half of the comments received specifically offered
support for the NCUA's efforts to provide more regulatory clarity and
make compliance easier by identifying all loan maturity requirements in
one section and adding cross-citations. No commenters opposed the
changes. As such, the NCUA is adopting these changes as proposed.
ii. The Treatment of Maturities for Lending Actions That Qualify as
``New Loans'' Under GAAP
The proposal also clarified that, in the case of a lending action
qualifying as a ``new loan'' under GAAP, the maturity limit is
calculated from the new date of origination.\15\ The Board proposed to
accomplish this by adding language to Sec. 701.21(c)(4), which
articulates the general 15-year maturity limit. The Board is adopting
the proposal without change.
---------------------------------------------------------------------------
\15\ ASC 310-20-35-9 & 10.
---------------------------------------------------------------------------
Nearly one-third of commenters addressed this aspect of the
proposal. The vast majority of these commenters explicitly supported
the proposal. Several commenters noted that it is unclear if the
proposal applies only to new loan originations, loan modifications, or
both, and they requested further clarity regarding the proposal. To
alleviate any potential confusion, the Board clarifies that the final
rule applies to any lending action that qualifies as a new loan under
GAAP, whether that action is a new origination or a modification.
iii. Request for Comment on Providing Longer Maturity Limits for
Certain Loans
In the proposal, the Board sought advanced comment on whether it
should provide longer maturity limits for 1-4 family real estate loans
and other loans (such as certain home improvement, mobile home, and
second mortgage loans) as permitted by section 107(5)(A)(i)-(ii) of the
FCU Act and remove the case-by-case exception that the Board can
provide for covered 1-4 family real estate loans. As discussed earlier,
these maturity limits are implemented in Sec. 701.21(f) and (g) of the
NCUA's regulations. The case-by-case exception is located in Sec.
701.21(g)(1) of the NCUA's regulations and provides that the Board can
permit an FCU to make loans with maturities that exceed the
regulation's 40-year limit ``on a case-by-case basis, subject to the
conditions of this paragraph (g).'' \16\
---------------------------------------------------------------------------
\16\ 12 CFR 701.21(g)(1).
---------------------------------------------------------------------------
Nearly every commenter addressed the various maturity limits in
some manner. Comments on the maturity limits generally fell into three
categories: (1) Comments asking the NCUA to take action the Board does
not believe it is authorized to take under the FCU Act; (2) responses
to the request for advanced comment on actions the Board does believe
it is authorized to take under the FCU Act, which the Board is taking
under advisement for future rulemaking purposes; and (3) unsolicited
comments that are more appropriately handled by guidance or legal
opinion.
Category 1. Many commenters expressed displeasure with the general
[[Page 10973]]
15-year maturity limit \17\ and specifically the 15-year maturity limit
on first-lien, 1-4 family real estate loans that are not the principal
residence of the borrower. The Board has no authority to alter this
statutory limit.
---------------------------------------------------------------------------
\17\ 12 U.S.C. 1757(5).
---------------------------------------------------------------------------
Category 2. Commenters addressed the following provisions on which
the Board sought advanced comment: (1) The current 40-year maturity
limit on long-term residential real estate loans where the 1-4 family
unit is the principal residence of the borrower; (2) the case-by-case
exception the Board can use to grant maturity limits that exceed 40
years on long-term residential real estate loans; and (3) the 20-year
maturity limit for covered home improvement, mobile home, and second
mortgage loans. While the Board has the authority to amend these
provisions, they are beyond the scope of what the Board proposed and
thus under the APA the Board cannot act on them now, and would have to
issue a new proposed rule. The Board is taking these comments under
advisement and is considering whether to issue a proposed rule at a
later date pursuant to the NCUA's normal notice and comment rulemaking
process.
Category 3. Commenters provided unsolicited feedback on issues not
specifically raised in the proposed rule. For example, several
commenters requested clarification on the proper characterization of a
loan on a residential dwelling that includes a detached structure on
the same parcel of land, such as a ``mother-in-law suite.'' The Board
believes this is more appropriately handled by guidance or legal
opinion and may take such action later this year.
B. Single Borrower and Group of Associated Borrowers Limits
i. More Clearly Identifying the Various Limits
Three provisions of the NCUA's regulations address limits on loans
to a single borrower or group of associated borrowers: (1) Sec.
701.21(c)(5) Addresses the general limit; (2) Sec. 701.22(b)(5)(iv)
addresses the limit on loan participations; and (3) Sec. 723.4(c)
addresses the limit on commercial loans. Because these provisions are
spread among several sections of the NCUA's regulations, some
stakeholders are not aware that there are multiple limits that apply in
different contexts. To rectify this, the proposal made clear that all
three of these limits exist. Rather than move the provisions that
specifically apply to loan participations and commercial loans from
their current regulatory sections to the general limit section, the
NCUA proposed to include cross-citations to the more specific loan
participation and commercial loan limits in the general limit section
(Sec. 701.21(c)(5)).
Section 701.21(c)(5), as part of the general rules on loans and
lines of credit to members, imposes the FCU Act's ten percent limit on
loans and lines of credit to any member.\18\ Specifically, Sec.
701.21(c)(5) requires that ``[n]o loan or line of credit advance may be
made to any member if such loan or advance would cause that member to
be indebted to the Federal credit union upon loans and advances made to
the member in the aggregate amount exceeding 10% of the credit union's
total unimpaired capital and surplus.'' \19\ Section 701.21(c)(5) also
provides an outdated cross-citation to part 723 for the specific limit
on commercial lending. The proposal removed this outdated cross-
citation and provided updated references to both the current loan
participation limit in Sec. 701.22(b)(5) and the commercial lending
limit in Sec. 723.4(c).
---------------------------------------------------------------------------
\18\ 12 U.S.C. 1757(5)(A)(x).
\19\ 12 CFR 701.21(c)(5).
---------------------------------------------------------------------------
The Board also proposed conforming amendments to update cross-
citations to the single borrower and group of associated borrower
limits in Sec. Sec. 701.20(c)(2) and 701.22(b)(1).
One-third of commenters addressed the technical and clarifying
amendments the Board proposed related to the limits on loans to a
single borrower or group of associated borrowers. All of these
commenters supported adding internal cross-citations to more clearly
identify the various limits in the general lending, loan
participations, and commercial lending regulations. Three of these
commenters specifically stated that this would simplify compliance.
Several commenters noted confusion with the current layout.
One commenter said that the fact that part 741 incorporates
applicable provisions by reference compounds the difficulty for
federally insured, state-chartered credit unions (FISCUs). The
commenter recommended that the NCUA incorporate loan limitations
applicable to FISCUs in Sec. 741.203 in their entirety. The Board
appreciates the commenter's suggestion, but does not believe such a
change is necessary for FISCUs to understand the applicable maturity
limits.
Another commenter recommended that, because the loan participation
and commercial loan limits also apply to a group of associated
borrowers, the NCUA should also include in the general lending
regulations reference and cross-citations to the ``associated
borrower'' definition in Sec. Sec. 701.22 and 723.2 of the NCUA's
regulations. The Board is concerned that the commenter's suggestion to
include cross-citations in the general lending regulations to the
definition of ``associated borrower'' in the loan participation and
commercial lending regulations would cause confusion for credit unions.
The term ``associated borrower'' does not appear in the general lending
regulations and does not apply to the general lending limit. As noted,
the Board is of the view that cross-citations to the term ``associated
borrower'' in the commercial lending and loan participation regulations
would only serve to confuse readers and raise questions of its
applicability and relevance to the general lending limit where that
term is not defined.
The Board believes that the proposed cross-citations provide an
efficient and user-friendly way to identify and comply with the
multiple lending limits in the NCUA's regulations. As such, the Board
is adopting the amendments as proposed.
ii. Request for Comment Regarding the Limits Applicable to Loan
Participations and Commercial Loans
In the proposal, the Board sought advanced comment on the
possibility of establishing a single universal limit on loans to a
single borrower or group of associated borrowers in lieu of the current
system of having various limits depending on the type of loan. The NCUA
noted that such a limit may help facilitate compliance and reduce
regulatory burden. Currently, a loans to one borrower limit of 15
percent of a federally insured credit union's net worth exists for: (1)
Commercial loans and (2) loan participations. A waiver from this limit
is available for loan participations, but not for commercial loans.
Instead, an alternate limit is available for commercial loans.
More specifically, the 15 percent limit on loan participations can
be waived by the appropriate regional director for FCUs, and, in the
case of a federally insured, state-chartered credit union, by the
regional director with prior written concurrence of the appropriate
state supervisory authority.\20\ The limit on commercial loans,
however, does not provide for a waiver. Instead, it provides
[[Page 10974]]
that ``the aggregate dollar amount of commercial loans to any one
borrower or group of associated borrowers may not exceed the greater of
15 percent of the federally insured credit union's net worth or
$100,000, plus an additional 10 percent of the credit union's net worth
if the amount that exceeds the credit union's 15 percent general limit
is fully secured at all times with a perfected security interest by
readily marketable collateral as defined in Sec. 723.2 of this part.
Any insured or guaranteed portion of a commercial loan made through a
program in which a federal or state agency (or its political
subdivision) insures repayment, guarantees repayment, or provides an
advance commitment to purchase the loan in full, is excluded from this
limit.'' \21\
---------------------------------------------------------------------------
\20\ 12 CFR 701.22(b)(5)(iv). The appropriate regional director
for FCUs with $10 billion or more in assets is the Director of the
Office of National Examinations and Supervision. 12 CFR 700.2.
\21\ 12 CFR 723.4(c).
---------------------------------------------------------------------------
Approximately half of the commenters specifically addressed a
potential universal limit. These commenters offered mixed views on the
potential limit and provided the Board with a great deal to consider
moving forward. The NCUA will continue to evaluate the comments
received and determine whether a single universal limit would be
beneficial. If the Board determines that a universal limit should be
adopted, the Board will issue a proposed rule at a later date pursuant
to the NCUA's normal notice and comment rulemaking process.
III. Section-by-Section Analysis
The clarifying amendments in this final rule are largely technical
in nature. As a result, most of the current language in Sec. 701.21
remains. The changes to Sec. 701.21 and the conforming amendments to
Sec. Sec. 701.20 and 701.22 are discussed in more detail below.
Section 701.20 Suretyship and guaranty.
(c) Requirements.
The final rule makes minor conforming amendments to Sec.
701.20(c).
(c)(2).
The final rule makes conforming amendments to the section governing
requirements for suretyship or guaranty agreements by removing outdated
cross-citations to the loans to one borrower or group of associated
borrowers limit in Sec. Sec. 723.2 and 723.8 of the member business
lending regulation and adding an updated cross-citation to Sec.
723.4(c).
Section 701.21
(c) General rules.
(c)(4) Maturity.
The final rule divides Sec. 701.21(c)(4) into two new paragraphs.
One paragraph, Sec. 701.21(c)(4)(i), states the general rule that
loans carry a 15-year maturity. The other, Sec. 701.21(c)(4)(ii),
makes more explicit that there are exceptions to the general 15-year
maturity limit in Sec. 701.21(e) through (g) for various types of
credit union loans.
(c)(4)(i) General rules.
The final rule maintains all of current Sec. 701.21(c)(4) in Sec.
701.21(c)(4)(i), which articulates the general 15-year maturity limit
that exists on FCU loans. However, the final rule also adds language to
clarify that the maturity for a new loan under GAAP is calculated from
the new date of origination.
(c)(4)(ii) Exceptions.
Section 701.21(c)(4)(ii) of the final rule explicitly states, in
three paragraphs ((c)(4)(ii)(A), (B), and (C)), that there are three
exceptions to the general 15-year maturity limit and cross-cites to
Sec. 701.21(e) through (g) as follows:
(c)(4)(ii)(A).
Section 701.21(c)(4)(ii)(A) of the final rule cross-cites to the
exception to the general 15-year maturity limit in Sec. 701.21(e)
regarding covered loans secured, in full or in part, by the insurance
or guarantee of, or with an advance commitment to purchase the loan, in
full or in part, by the Federal Government, a State Government or any
agency of either.
(c)(4)(ii)(B).
Section 701.21(c)(4)(ii)(B) of the final rule cross-cites to the
exception to the general 15-year maturity limit in Sec. 701.21(f)
regarding covered home improvement, mobile home, and second mortgage
loans.
(c)(4)(ii)(C).
Section 701.21(c)(4)(ii)(C) of the final rule cross-cites to the
exception to the general 15-year maturity limit in Sec. 701.21(g)
regarding covered 1-4 family real estate loans.
(c)(5) Ten percent limit.
The final rule revises Sec. 701.21(c)(5) to add cross-citations to
the specific requirements on loans to a single borrower or group of
associated borrowers in the loan participation rule, Sec.
701.22(b)(5)(iv), and member business lending rule, Sec. 723.4(c).
(e) Insured, Guaranteed, and Advance Commitment Loans.
The final rule revises Sec. 701.21(e) to make more explicit that
the maturity limits applicable to loans covered by paragraph (e) are
notwithstanding the general 15-year limit in paragraph (c)(4). The
final rule also adds a cross-citation to paragraph (c)(4).
(f) 20-Year Loans.
The final rule retains almost all of current Sec. 701.21(f), but
inserts some additional language to improve clarity.
(f)(1).
The final rule revises Sec. 701.21(f)(1) to make more explicit
that the maturity limit applicable to loans covered by paragraph (f) is
notwithstanding the general 15-year limit in paragraph (c)(4). The
final rule also adds a cross-citation to paragraph (c)(4).
(g) Long-Term Mortgage Loans.
The final rule retains almost all of Sec. 701.21(g), but inserts
some additional language to improve clarity.
(g)(1).
The final rule revises Sec. 701.21(g)(1) to make more explicit
that the maturity limit applicable to loans covered by paragraph (g) is
notwithstanding the general 15-year limit in paragraph (c)(4). The
final rule also adds a cross-citation to paragraph (c)(4).
Section 701.22
(b).
As described in more detail below, the final rule makes minor
conforming amendments to Sec. 701.22(b) regarding loan participations.
(b)(1).
The final rule updates the cross-citation in Sec. 701.22(b)(1),
which provides that for a federally insured credit union to purchase a
participation interest in a loan, the loan must comply with all
regulatory requirements to the same extent as if the purchasing
federally insured credit union had originated the loan. Specifically,
the final rule changes the outdated cross-citation in Sec.
701.22(b)(1) from Sec. 723.8 to Sec. 723.4(c).
IV. Legal Authority
The Board is issuing this rule pursuant to its authority under the
FCU Act. Under the FCU Act, the NCUA is the chartering and supervisory
authority for FCUs and the federal supervisory authority for federally
insured credit unions.\22\ The FCU Act grants NCUA a broad mandate to
issue regulations governing both FCUs and all federally insured credit
unions. Section 120 of the FCU Act is a general grant of regulatory
authority and authorizes the Board to prescribe rules and regulations
for the administration of the FCU Act.\23\ Section 207 of the FCU Act
is a specific grant of authority over share insurance coverage,
conservatorships, and liquidations.\24\ Section 209 of the FCU Act is a
plenary grant of regulatory authority to the NCUA to issue rules and
regulations necessary or appropriate to carry out its role as share
insurer for all federally insured credit unions.\25\
[[Page 10975]]
Accordingly, the FCU Act grants the Board broad rulemaking authority to
ensure that the credit union industry and the National Credit Union
Share Insurance Fund remain safe and sound.
---------------------------------------------------------------------------
\22\ 12 U.S.C. 1752-1775.
\23\ 12 U.S.C. 1766(a).
\24\ 12 U.S.C. 1787.
\25\ 12 U.S.C. 1789.
---------------------------------------------------------------------------
V. Regulatory Procedures
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires that, in
connection with a final rule, an agency prepare and make available for
public comment a final regulatory flexibility analysis that describes
the impact of the final rule on small entities. A regulatory
flexibility analysis is not required, however, if the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities (defined for purposes of the RFA
to include credit unions with assets less than $100 million) \26\ and
publishes its certification and a short, explanatory statement in the
Federal Register together with the rule. The final rule reduces
regulatory burden through clarifying and technical changes and will not
have an impact on small credit unions. Accordingly, the NCUA certifies
that this final rule will not have a significant economic impact on a
substantial number of small credit unions.
---------------------------------------------------------------------------
\26\ See 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in
which an agency creates new or amends existing information collection
requirements.\27\ For purposes of the PRA, an information collection
requirement may take the form of a reporting, recordkeeping, or a
third-party disclosure requirement. The final rule does not contain
information collection requirements that require approval by OMB under
the PRA.\28\ The final rule only makes clarifying and technical
changes.
---------------------------------------------------------------------------
\27\ 44 U.S.C. 3507(d); 5 CFR part 1320.
\28\ 44 U.S.C. chap. 35.
---------------------------------------------------------------------------
C. Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, the NCUA, an
independent regulatory agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive order. This rulemaking will not
have a substantial direct effect on the states, on the connection
between the national government and the states, or on the distribution
of power and responsibilities among the various levels of government.
The NCUA has determined that this final rule does not constitute a
policy that has federalism implications for purposes of the executive
order.
D. Assessment of Federal Regulations and Policies on Families
The NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\29\
---------------------------------------------------------------------------
\29\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------
E. Small Business Regulatory Enforcement Fairness Act of 1996
The Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA) provides generally for congressional review of agency rules. A
reporting requirement is triggered in instances where the NCUA issues a
final rule as defined by Section 551 of the Administrative Procedure
Act. The NCUA does not believe this final rule is a ``major rule''
within the meaning of the relevant sections of SBREFA. The NCUA has
submitted the rule to the Office of Management and Budget for its
determination in that regard.
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on March 14,
2019.
Gerard Poliquin,
Secretary of the Board.
For the reasons discussed above, the Board amends 12 CFR part 701
as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority citation for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789.
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.
Sec. 701.20 [Amended]
0
2. Amend Sec. 701.20(c)(2) by removing the words ``723.2 and 723.8''
and adding in their place ``723.4(c)''.
0
3. Amend Sec. 701.21 by revising paragraphs (c)(4) and (5), (e),
(f)(1) introductory text, and (g)(1) to read as follows:
Sec. 701.21 Loans to members and lines of credit to members.
* * * * *
(c) * * *
(4) Maturity. (i) In General. The maturity of a loan to a member
may not exceed 15 years. Lines of credit are not subject to a statutory
or regulatory maturity limit. Amortization of line of credit balances
and the type and amount of security on any line of credit shall be as
determined by contract between the Federal credit union and the member/
borrower. In the case of a lending action that qualifies as a ``new
loan'' under GAAP, the new loan's maturity is calculated from the new
date of origination.
(ii) Exceptions. Notwithstanding the general 15-year maturity limit
on loans to members, a federal credit union may make loans with
maturities:
(A) As specified in the law, regulations or program under which a
loan is secured, in full or in part, by the insurance or guarantee of,
or with an advance commitment to purchase the loan, in full or in part,
by the Federal Government, a State government or any agency of either,
as provided in paragraph (e) of this section;
(B) of up to 20 years or such longer term as is provided in
paragraph (f) of this section; and
(C) of up to 40 years or such longer term as is provided in
paragraph (g) of this section.
(5) Ten percent limit. No loan or line of credit advance may be
made to any member if such loan or advance would cause that member to
be indebted to the Federal credit union upon loans and advances made to
the member in an aggregate amount exceeding 10% of the credit union's
total unimpaired capital and surplus. In the case of loan
participations as defined in Sec. 701.22(a) of this part and
commercial loans as defined in Sec. 723.2 of this chapter, additional
limitations apply as set forth in Sec. 701.22(b)(5)(iv) of this part
and Sec. 723.4(c) of this chapter.
* * * * *
(e) Insured, Guaranteed, and Advance Commitment Loans.
Notwithstanding the general 15-year maturity limit on loans to members
in paragraph (c)(4) of this section, a loan secured, in full or in
part, by the insurance or guarantee of, or with an advance commitment
to purchase the loan, in full or in part, by the Federal Government, a
State government or any agency of either, may be made for the maturity
and under the terms and conditions, including rate of interest,
specified in the law, regulations or program under which the insurance,
guarantee or commitment is provided.
[[Page 10976]]
(f) * * *
(1) Notwithstanding the general 15-year maturity limit on loans to
members in paragraph (c)(4) of this section, a federal credit union may
make loans with maturities of up to 20 years in the case of:
* * * * *
(g) * * *
(1) Authority. Notwithstanding the general 15-year maturity limit
on loans to members in paragraph (c)(4) of this section, a federal
credit union may make residential real estate loans to members,
including loans secured by manufactured homes permanently affixed to
the land, with maturities of up to 40 years, or such longer period as
may be permitted by the NCUA Board on a case-by-case basis, subject to
the conditions of this paragraph (g).
* * * * *
Sec. 701.22 [Amended]
0
4. Amend Sec. 701.22(b)(1) by removing the words ``Sec. 723.8'' and
adding in their place ``Sec. 723.4''.
[FR Doc. 2019-05186 Filed 3-22-19; 8:45 am]
BILLING CODE 7535-01-P