When NCUA’s final member business lending (MBL) rule goes into effect Jan. 1, credit unions will need to know how to circumvent the risk that will arise based on those changes.
One way to mitigate risk is to pay attention to the details of policies and procedures, says Chuck Anderson, business services consultant.
“My policy was always as small as I could get it: It met the requirements of the regulation,” he told the CUNA Lending Council Conference Monday afternoon in Las Vegas. And regulators are going to want practices put into board policy.
Anderson served as executive vice president/chief lending officer of the former Arizona State Credit Union (now OneAZ Credit Union ) in Phoenix. He suggests credit unions review other policies such as collections, appraisal, and environmental because they overlap across board policies.
“You don’t want to appear sloppy," he says. "Review policies and procedures to ensure everything matches and correctly references each other.”
Examiners’ skepticism was relieved when they saw the standardized files, says Anderson. “When we had our first exit interview from NCUA, that was the single thing that the examiners jumped up and down about—the order and neatness of the files,” he recounts.
Examiners should never find duplicate files either because it shows credit unions are not looking at their portfolios. “Clean that stuff up, get rid of it,” Anderson says.
A credit union may use a narrative-only risk rating system, a score-sheet only risk rating system, or a combination of both. “Seriously consider both ways,” he suggests.
Anderson also advises that the narrative and scoring systems align. “You’re not a loan producer, now you’re a [loan] manager or a director,” he says. That means that in order to be prepared for questions from examiners, board, and management, you will need to spend time on administrative tasks.
Read more CUNA News coverage of the CUNA Lending Council Conference.