NCUA Loan Participation Rule Effective Sept. 23
The NCUA Board approved a final rule in June to revise its loan participation rules (Parts 701 and 741).
The rule applies to all federally insured credit unions that purchase loan participations originated by credit unions or other eligible organizations.
The rule’s original effective date was July 25. But at CUNA’s urging, the agency extended the effective date to Sept. 23 to give credit unions additional time to comply.
The “new rule is intended to minimize losses to the system by requiring purchasers to carefully evaluate all participations and their originators,” says NCUA Board Chairman Debbie Matz.
Under the rule:
- Purchasing credit unions will be subject to a single-originator concentration limit of $5 million or 100% of net worth, whichever is greater.
- The risk retention requirement for originating federal credit unions will be 10%, as required by the Federal Credit Union Act.
- The risk retention requirement for other originating eligible organizations—including federally insured, state-chartered credit unions—will be 5%, consistent with the standard for securitizers under the Dodd-Frank Act (unless state law requires a higher percentage).
- Federally insured credit unions may establish different underwriting standards for loan participations than they use when originating their own loans.
Credit unions can apply for waivers on certain key provisions of the rule. More information is available in CUNA’s e-Guide at cuna.org/compliance and at ncua.gov.