NASCUS Asks NCUA to Clarify Waiver Process for MBL Personal Guarantee in RegFlex

May 27, 2010 — NASCUS wrote the National Credit Union Administration (NCUA) on May 24 about the agency's proposed changes to its Regulatory Flexibility Program (RegFlex). The changes to Part 723, Member Business Lending (MBL), impact federally insured, state-chartered credit unions (FISCUs). FISCUS are required to follow Part 723, unless their state has a NCUA-approved, state-specific MBL rule. In the case of state-specific rule, these changes would not apply.

The proposed changes would rescind the exemption for qualified credit unions to require personal guarantees for MBL. However, credit unions could still apply for a waiver. While NASCUS agrees that requiring a personal guarantee is an important consideration for the proper underwriting of a loan, NASCUS suggests two enhancements. One, NCUA should strengthen state and federal regulators' ability to address weak MBL programs and require more stringent underwriting and collateral requirements; and two, clarify the standards for approving a waiver.

"Part 723.10(e) and Part 723.11 are generally silent as to what measurables the Regional Directors will use to evaluate waivers for federal credit unions and to determine if they concur with state regulators in requests from state-chartered credit unions," wrote NASCUS. "As currently worded, Part 723 simply provides no guidance to inform credit unions, or state regulators, whether a particular credit union meets NCUA's internal threshold for granting a waiver."

To view the full letter, follow this link.