Get NASCUS Report in your in-box; click here

Aug. 10, 2018

FAQs outline changes to rules by EGRRCPA;
note pledge to work with state supervisors

More than two months after regulatory relief legislation was enacted into law on President Donald Trump’s signature, NCUA has issued a series of “frequently asked questions” (FAQs) about changes for credit unions in the new law, with a commitment to work cooperatively with states in the process.

The FAQs outline the impact on federally insured credit unions by the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155), which the president signed May 24. In issuing the FAQs, NCUA stated that credit unions should be aware of the changes, particularly those “major changes in the areas of member business lending, appraisals, and the Home Mortgage Disclosure Act.”

The agency said it would update examiner guidance and exam procedures to reflect the changes. Also, NCUA said it would “continue to work cooperatively with state supervisory authorities and the other federal regulators as these changes are implemented.”

The FAQs focus on four areas: business lending to members, appraisals, the Home Mortgage Disclosure Act (HMDA), and “other changes applicable to credit unions.”

For the biggest change for credit unions – on business lending (which amended the statutory member business loan limit to exempt all loans secured by a 1- to 4-family dwelling (residential property) from the definition of a member business loan) -- the agency said it had updated its call report instructions for the June 30, 2018, cycle. “Credit unions will only report loans that meet the revised definition of a member business loan in account 400A (see page 77 of the Call Report Instructions),” the agency states.

Because of the change, credit unions should no longer report any loans secured by a 1- to 4-family residential property in account 400A, the agency said. “Credit unions should continue to report all loans secured by residential property in Section 2 of Schedule A. There will also be one related change to a Call Report field scheduled to take effect with the September 30, 2018, Call Report cycle.”

Additionally, the NCUA is amending the call report instructions related to how non-member business loans are reported for purposes of calculating a credit union’s risk-based net worth requirement. These changes are reflected in the “Call Report Instructions for Account 400 (see pages 78 and 79 of the Call Report Instructions).”

For purposes of calculating a credit union’s risk-based net worth ratio, the FAQs point out that “long-term real estate loans” secured by a 1- to 4-family residential property are now included in the “long-term real estate loans” risk portfolio. “Loans secured by a 1- to 4-family residential property that will contractually refinance, reprice, or mature within the next five years are included in the ‘average-risk assets’ risk portfolio for purposes of calculating a credit union’s risk-based net worth ratio,” the agency stated.

Non-member business loans are no longer included in the “member business loans outstanding” risk portfolio for purposes of calculating a credit union’s risk-based net worth ratio (they are now included in the risk-based net worth risk portfolio, based on the type of loan and underlying collateral.)

The change made to the member business loan definition by the EGRRCPA does not alter the agency’s expectations for managing risk for these loan types, NCUA states. “As with all loans, a credit union’s risk assessment and management should be appropriate for the type of loan and the specific risks associated with the borrowing arrangement,” the agency wrote. “The repayment source should always be identified and evaluated for sufficiency and reliability.”

Frequently Asked Questions About the Impact of S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, on Credit Unions


On appraisals, the FAQs note that the EGRRCPA provides an exemption to the requirements for certain transactions with values of less than $400,000 involving real property or an interest in real property that is located in a rural area. “Credit unions may begin applying this exemption immediately,” the agency wrote, adding that it is in the process of updating Part 722 of its rules and regulations and corresponding examiner guidance to reflect the change.

On the HMDA requirements exemptions, the FAQs note that partial exemptions are generally available for closed-end mortgage loans, if the credit union originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years, and; open-end lines of credit, if the credit union originated fewer than 500 open-end lines of credit in each of the two preceding calendar year.

“For closed-end mortgage loans or open-end lines of credit subject to the partial exemptions, the act states that the ‘requirements of [HMDA section 304(b)(5) and (6)] shall not apply.’ Accordingly, for these transactions, those institutions are exempt from the collection, recording, and reporting requirements for some, but not all, of the data points specified currently in Regulation C.”

The agency noted that the BCFP (formerly known as the CFPB) expects later this summer to provide further guidance on the applicability of EGRRCPA to HMDA data collected in 2018.

For the fourth area, the FAQs round up a variety of miscellaneous changes made by EGRRCPA affecting credit unions, including: Servicemembers Civil Relief Act (SCRA) foreclosure relief timeframe for military members; safe harbor provisions for qualified residential mortgages; closing disclosure requirements under the TRID rule; protections related to private student loans, and; lender requirements for refinanced Veterans Affairs loans.


For the first time in 2018 NCUA this week issued a “Letter to Credit Unions,” outlining its Initiatives designed to “improve and modernize” exams and supervision, and which aim to replace “outdated, end-of-life examination systems,” among other things.

In LTCU 18-CU-01, the agency outlined the examination and supervision initiatives as tools for streamlining processes, adopting “enhanced examination techniques” and leveraging “new technology and data to maintain high quality supervision of insured credit unions with less onsite presence.”

While the message is the first LTCU of the year, typically by this time (since 2010), the agency has issued, on average, six such letters which serve as direct communications from the agency to federally insured credit unions. In 2017, the agency sent nine LTCUs; since the financial crisis ended at the beginning of the decade, the agency has sent 84 direct communications to credit unions.

The letter noted that the agency has recently approved and implemented five initiatives to modernize its exam processes. Those are: the Flexible Examination Pilot Program (FLEX); Office of National Examinations and Supervision (ONES) Data Driven Supervision; the Shared NCUA-State Regulator Federally Insured, State-Chartered Credit Union (FISCU) Program; the Enterprise Solution Modernization Program (ESM); and the Virtual Examination Program.

“These five initiatives are interrelated and complement each other,” the letter states. “As these initiatives support and build upon each other, they will ultimately result in a fully modernized examination and supervision program with various incremental improvements occurring along the way.”

The letter also lists intended benefits of the initiatives, including: More efficient examinations and supervision; more consistent and accurate supervisory determinations; enhanced coordination with State Supervisory Authorities; and reduced travel costs.

“Modernizing agency systems and processes will reduce burden on the credit union community and increase the effectiveness of the NCUA,” NCUA Board Chairman J. Mark McWatters (who signed letter) stated. “Agency staff will continue to seek credit union input on ways to reduce the burden of the supervisory process without sacrificing the mission of the agency. Ongoing communication and transparency are key in the success of these endeavors.”

Letter to Credit Unions (18-CU-01) Examination Modernization Initiatives


Letting state-legal cannabis businesses use credit unions and banks will provide access to “capital, security, efficiency, and record keeping,” according to a policy directive adopted last week by a group of state legislators from across the nation meeting in Los Angeles. The National Conference of State Legislatures (NCSL, whose membership includes legislators from the states) policy directive also stated that a federal prohibition on marijuana possession and sales forces growers, processors and retailers to operate on a cash-only basis, attracting criminal activity and creating substantial public safety risks. “NCSL acknowledges that a cash-only industry reduces transparency in accounting and makes it difficult for states to implement an effective regulatory regime that ensures compliance,” the directive stated. It also called existing Treasury Department guidance put in place during the Obama administration “insufficient,” adding that “current federal regulations force financial institutions to incur inordinate risk, should they decide to provide banking services to licensed cannabis businesses.” Credit unions were represented at the conference through attendance by NASCUS on behalf of both state regulators and state-chartered credit unions; staff from state leagues; and the Credit Union National Assn. (CUNA).


Fostering interaction between “innovative firms” -- or fintechs -- and regulators internationally in order to “create a new framework for cooperation between financial services regulators on innovation-related topics” is the aim of an effort announced this week by the BCFP. The agency also indicated its new “Office of Innovation” will play a key role in the effort, and that it invites other regulators (presumably, including those from states) to provide input.

The bureau said the “Global Financial Innovation Network (GFIN)” is an international effort that aims to: act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models; provide a forum for joint policy work and discussions; and to provide firms with an environment in which to “trial cross-border solutions.”

According to the bureau, other regulatory agencies from around the world have already joined the GFIN, including from the United Kingdom. The BCFP said a February 2018 whitepaper on the idea of a “global sandbox” by the UK’s Financial Conduct Authority (FCA) generated “some 50 responses” in support of the “idea of regulators collaborating on the topic.”

A week ago, the OCC announced it was accepting applications from fintech firms for a new national charter. That followed a Treasury report encouraging the bank regulator to act on accepting applications for fintech charters, and which also urged regulators to establish a kind of “regulatory sandbox” to encourage innovation.

However, the idea of “sandboxes” and charters for “innovative firms” sponsored by the federal government is receiving pushback from some state regulators. The Conference of State Bank Supervisors (CSBS) called the OCC fintech charter “a regulatory train wreck in the making.” According to The Wall Street Journal Thursday, the organization is considering whether to mount a new legal fight against the charter (a federal court rebuffed a previous challenge last spring).

Additionally, New York Department of Financial Services Superintendent  Maria T. Vullo last week said a national fintech charter “will impose an entirely unjustified federal regulatory scheme on an already fully functional and deeply rooted state regulatory landscape.” And, Arizona Attorney General Mark Brnovich (R), also quoted in the Journal story, urged federal regulators to step back or enter cooperative agreements with states. “Washington, D.C., is, frankly, where good ideas go to die,” he said.

BCFP Collaborates With Regulators Around The World To Create Global Financial Innovation Network


This week marked the 20th anniversary of enactment into law the Credit Union Membership Access Act (CUMAA, H.R. 1151) – a milestone noted by a number of organizations, including NASCUS. In comments to the Credit Union Journal, NASCUS’ Lucy Ito noted that the state system supported the legislation (even though its focus was on federal credit union field of membership), to ensure the federal charter remained viable. But she also noted that the state system took the opportunity to enhance the goals of the state system – such as by including language in the final bill requiring NCUA to consult with state supervisory agencies in enacting member business lending and Prompt Corrective Action rules.

Credit unions have grown over the last 20 years, she noted, in spite of the continuing risk-based capital debate, and the lack of credit union access to supplemental capital, she noted. “The anniversary of HR 1151 is a reminder that Congress intended for NCUA to work with state supervisory agencies to develop risk-based capital rules and that the industry should continue to advocate for credit union access to supplemental capital — which was omitted from HR 1151 and viewed as a major flaw of the bill,” she pointed out.

CU Journal: HR 1151's legacy 20 years later


NCUA’s 2017 advanced notice of proposed rulemaking on alternative capital, and the recent proposal to provide additional payday alternative loan options, are two examples of the regulatory changes being considered by NCUA that could assist minority credit unions in meeting the needs of their communities, agency Board Chairman J. Mark McWatters said this week. Speaking to the African American Credit Union Coalition (AACUC) 20th annual conference in Atlanta, McWatters offered few other details, in a speech that focused mostly on the agency’s efforts to explore ways for increasing its support of minority credit unions through training, resources and other action. He did indicate, however, that the alternative capital and payday lending proposals are other ways for modernizing the credit union regulatory structure to give credit unions the flexibility they need to compete while maintaining safety and soundness.

McWatters: Minority Credit Unions Play a Critical Role in Reaching the Underserved


Want to revisit fond memories of last month’s NASCUS 2018 State System Summit in Orlando? Did you miss the Summit (for some reason) and want to see how it looked? In either case (or in others), you are in luck! NASCUS has photos for you to review and use (if you like) for your purposes.

The Summit, which ran July 15-19 in Orlando, Fla., offered a variety of general sessions, networking opportunities and insights from system leaders on topics covering everything from the state of the state system cybersecurity (and more).

Photos from the four-day event are available now at the link below; the collage above is just a sample of what we’ve made available. Happy picture viewing!

NASCUS 2018 State System Summit photos


New jobs have been posted on the NASCUS Career Opportunities website page, for a new Credit Unions Division Director at the Washington State Department of Financial Institutions' (DFI), and an administrative assistant at NASCUS (at the association’s Arlington, Va., headquarters). Summaries about both jobs are listed on the webpage, along with relevant contact information and links for more information.

NASCUS Career Opportunities web page


ON THE ROAD: At the AACUC; reception in WI Aug. 21

NASCUS Vice President of Communications Shelton Roulhac was a featured speaker this week at the AACUC’s Atlanta conference. Roulhac addressed marijuana business banking and the challenges state credit unions and their regulators face in complying with state law while adhering to federal guidelines. The event runs through today. (In the photo, Shelton moderates a session during the conference Thursday.) …  NASCUS and the Wisconsin Credit Union League are hosting a reception at CU House in Madison for all Wisconsin state-chartered credit unions Aug. 21 at 4 p.m. Credit unions are invited to come and get to know how NASCUS and the WCUL work together to ensure a safe and sound state credit union system. Special guest Kim Santos of the Wisconsin Department of Financial Institutions is scheduled to be on hand. Thanks to Brett Thompson of the The League and his team for hosting the event at their downtown facility. To RSVP, contact NASCUS staff at


BRIEFLY: RBC comments due Sept. 7; FinCEN extends exceptive relief; NASCUS Report takes a break

Comments are due Sept. 7 on NCUA’s proposal on risk-based capital, issued last week to delay to 2020 the imposition of the 2015 rule, and reduce the number of federally insured credit unions that would be affected by raising the rule’s asset-size threshold for “complex” credit unions from $100 million to $500 million ... The Treasury’s Financial Crimes Enforcement Network (FinCEN) said this week it is extending by 30 days (to Sept. 8) exceptive relief for financial institutions regarding accounts that automatically rollover or renew, such as certificates of deposit or loan accounts, from obligations under its beneficial ownership rules. The relief was first issued May 16 for accounts that were established before the beneficial ownership rule’s applicability date of May 11, 2018 … NASCUS Report is taking a week off during these warmer (and maybe slower?) days of summer; the next issue will be Aug. 24.

Information Contact:
Patrick Keefe,