NCUA’s member business lending rule has been in effect for more than 5 months now, and credit unions are still working on implementing the rule’s changes. This month’s compliance feature in Credit Union Magazine examines new collateral and security requirements in section 723.5 of the regulation.
The new rule allows credit unions to make their own risk-based decisions, as opposed to the strict loan-to-value limits and personal guarantee requirements.
From an operation perspective, this means credit unions should focus on:
NCUA examiners likely will approach the exam process as more of a “risk review” than a loan review. This means credit unions need to ensure they understand the risk they’re assuming in making each commercial lending decision, and document any deviation from accepted industry standards.