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Shorter community charter process second mortgage rule voted
ALEXANDRIA, Va. (12/18/09)--The National Credit Union Administration (NCUA) on Thursday approved a proposed rule that would revise the agency's community chartering policies and more clearly outline the parameters of a community chartered credit union. While federal credit unions that applied for community credit union charters have in the past provided “reams of information – hundreds of pages long – in order to demonstrate evidence of a community,” NCUA Chairman Debbie Matz said that the new NCUA standards will provide credit unions with a defined set of objective and quantifiable criteria to determine the existence of a well-defined local community. Credit unions also will no longer need to provide a narrative statement with their application.
Click to view larger image NCUA Chairman Debbie Matz, center, and the board discuss the community credit union charter changes with NCUA staff. (CUNA Photo)
The redesigned process will also shorten the amount of time needed to approve an application to “a couple of months” in most situations, with the more difficult situations needing slightly more time to be resolved, NCUA staff said. NCUA staff estimated that the previous application process resulted in an ordeal that took as long as 18 months in some cases. Commenting on the improved timeline, Matz said that “this proposed rule would dramatically improve the future process for credit unions to apply for community charters – and improve the standards for NCUA to evaluate them.” Under the proposal, a “community” could be a single political jurisdiction or multiple political jurisdictions within a single Metropolitan Division, as long as the total population does not exceed 2.5 million. To qualify for a new “rural district” standard, the area that a credit union looks to serve must be a contiguous area with over 50% of its population in “rural” census blocks. Additionally, the population of the area in question must not exceed 100,000. These limits, Matz said, “would ensure that a Rural District’s population is fairly small, yet still large enough to support a full-service credit union.” Credit unions must also detail how they will implement their business plan to serve the community in question and the unique needs of the various demographic groups in that community. Credit unions must also provide details on their community outreach and marketing plans, and an NCUA Regional Office will verify that these plans are being followed for the first three years that the new community credit union is in business. The NCUA will also allow credit unions that are insolvent or in danger of insolvency to merge with another credit union if its net worth is declining at a rate that will render it insolvent within 24 months or will reduce its total net worth under 2% within one year. The NCUA will also allow a merger if the credit union’s net worth is “significantly undercapitalized” under Prompt Corrective Act (PCA) requirements and there is no reasonable prospect of the credit union becoming “adequately capitalized” under PCA within the next 36 months. The NCUA will collect public comment on the rule for 60 days. The NCUA during the meeting also made final a rule that creates a limited exception to the 20-year maturity limit on second mortgage loans. Under the final rule, federal credit unions that take part in the U.S. Treasury Department's Making Home Affordable (MHA) Program would be permitted to extend second mortgages beyond 20 years to match the terms of modified first mortgages, which can have up to a 40-year maturity. This rule is unchanged from the interim final rule that the Board issued at its June meeting and was effective as of June 24, 2009. NCUA Chief Financial Officer Mary Ann Woodson also updated the NCUA on the status of its National Credit Union Share Insurance Fund (NCUSIF) and Temporary Corporate Credit Union Stabilization Fund (TCCUSF). According to Woodson, the NCUA has received $1.7 billion of the $2 billion dollars expected from the payment of NCUSIF 1% deposits and premium assessments. Those payments were due to the NCUA from federally insured credit unions this week. The NCUSIF’s equity level was at 1.27% as of November 30, 2009 and is expected to remain at that level through the rest of the year, Woodson said. Woodson also reported 328 CAMEL 4 and 5 credit unions, which hold nearly $41 billion of insured shares, as of November 2009, a 27% increase over the amount of CAMEL 4 and 5 credit unions reported as of November 2008. Woodson also reported that there was little to no change in the TCCUSF’s retained earnings since they were reported at last month’s board meeting.


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