Final rule, Temporary Regulatory Relief in Response to COVID-19 — Extension

NCUA Final Rule: Temporary Regulatory Relief in Response to COVID-19: Extension

Summary

Prepared by NASCUS Legislative & Regulatory Affairs Department
January 2021

NCUA is extending is extending the effective date of the April 21, 2020 temporary final rule, which modified certain regulatory requirements to help federally insured credit unions (FICUs) remain operational and address economic dislocation caused by the COVID-19 pandemic. Specifically, the temporary final rule:

  • raised the maximum aggregate amount of loan participations that a FICU may purchase from a single originating lender to the greater of $5,000,000 or 200% of the FICU’s net worth
  • temporarily suspended limitations on the eligible obligations that a federal credit union (FCU) may purchase and hold
  • tolled the required timeframes for the FCUs to occupy or dispose of properties not being used for FCU business

The Final Rule may be read here. The final rule extends the Temporary Final Rule published April 21,2020 through December 31, 2021. 

Summary

The temporary rule provides the following relief:

  • Aggregate Limit on Loan Participation Purchases

Part § 701.22 limits the aggregate amount of loan participations that a FICU may purchase from any one originating lender to the greater of $5,000,000 or 100% of the FICU’s net worth. The provision applies to FISCUs by reference in § 741.8(b)(4). Credit unions may seek a waiver from the aggregate cap from the NCUA RD.

The April temporary final rule raised these thresholds to the greater of $5,000,000 or 200% of a FICU’s net worth. This increased threshold is now in effect until December 31, 2021. Subsequent to the December 31, 2021 expiration date, a FICU must return into compliance with pre-existing limitation of $5,000,000 or 100% net worth (or seek a waiver).

  • Purchase, Sale, and Pledge of Eligible Obligations

NCUA rules § 701.23(b)(1)(i) and § 701.23(b)(2)(i), provide that an FCU may purchase an eligible obligation from any source, provided the FCU is empowered to grant the loan or the loan is refinanced within 60 days following its purchase so that it is a loan the FCU is empowered to grant. These restrictions do not apply to FISCUs

Generally, NCUA requires that a FCU’s only purchase eligible obligations of its own members. Part 701.23(b)(2) provides some limited exceptions to that limitation for well-capitalized FCUs that have composite CAMEL ratings of “1” or “2.” These FCUs can purchase the eligible obligations of any FICU or of any liquidating credit union without regard to whether the borrower is one of their members.

The Temporary Final Rule amends the rules to allow FCUs with CAMEL composite ratings of 1, 2, or 3 to purchase eligible obligations of FICUs and liquidating credit unions irrespective of whether the obligation belongs to the purchasing FCU’s members.

  • FCU Occupancy and Disposal of Acquired Premises

Part 701.36 limits FCU investments in fixed assets and establishes occupancy, planning, and disposal requirements for acquired and abandoned premises. If an FCU acquires premises, including unimproved land or unimproved real property, it must partially occupy them within six years or obtain a waiver from the RD.

The Temporary Final Rule provides that NCUA will not count any time between April 21, 2020 and December 31, 2021 in calculating FCU compliance.