NCUA’s first letter to credit unions (20-CU-01) of 2020 discusses supervisory priorities for the year.

It also examines recent changes to laws and regulations applicable to credit unions, and notes that the agency’s examination program has been updated to reflect these changes.

Updates include:

Commercial Real Estate Appraisal Rule

In July 2019, the NCUA Board approved a final rule amending Part 722 that increased the appraisal threshold for commercial real estate transactions from $250,000 to $1 million. Effective Oct. 22, 2019, commercial real estate transactions below $1 million do not require appraisals conducted by certified appraisers; instead, credit unions may choose to conduct a written estimate of market value or obtain an appraisal by a state-licensed appraiser.

Commercial real estate transactions valued at $1 million and greater are still required to obtain appraisals conducted by certified appraisers. The final rule increases the standards for the qualifications and independence of individuals conducting written estimates of market value.

Private Flood Insurance Rule

In February 2019, the NCUA Board and the other banking agencies finalized the private flood insurance rule. The private flood insurance rule relies on two main provisions regarding credit union acceptance of flood insurance policies that are not issued by the National Flood Insurance Program (that is, from private providers).

Credit unions must accept certain flood insurance policies from private providers under Part 760. For other policies from private providers, credit unions have the option to accept the insurance if the policy meets certain criteria.

Public Unit and Nonmember Shares Rule

In October 2019, the NCUA Board approved a final rule amending Section 701.32 regarding public unit and nonmember shares. Effective Jan. 29, 2020, federally insured credit unions generally can accept public unit and nonmember shares in an amount up to 50 percent of the credit union’s amount of paid-in and unimpaired capital and surplus, less any public unit or nonmember shares, or $3 million, whichever is greater.

A credit union must develop and make available for examination a plan for the use of funds if its public unit and nonmember shares, combined with its borrowings, exceeds 70 percent of paid-in and unimpaired capital and surplus.

Serving Hemp Businesses

On Dec. 20, 2018, President Trump signed into law the Agriculture Improvement Act of 2018. With the signing of this Act, hemp is no longer a controlled substance at the federal level. Hemp may be produced lawfully under the United States Department of Agriculture’s (USDA) Oct. 31, 2019, interim final rule establishing the U.S. Domestic Hemp Production Program.

This rule outlines provisions for the USDA to approve plans submitted by states and Indian tribes for the domestic production of hemp. It also establishes a federal plan for producers in states or territories of Indian tribes that do not have their own USDA-approved plan.

Many credit unions have a long and successful history of providing services to the agriculture sector. Credit unions may provide the customary range of financial services for business accounts, including loans, to lawfully operating hemp-related businesses within their fields of membership. Hemp provides new opportunities for communities with an economic base involving agriculture.

NCUA encourages credit unions to thoughtfully consider whether they are able to safely and properly serve hemp-related businesses.

The NCUA will be issuing additional guidance on this subject soon.

For 2020, NCUA examiners will be collecting data through the examination process concerning the types of services credit unions are providing to hemp-related businesses.

Supervisory Committee Audits Rule

In September 2019, the NCUA Board approved a final rule amending part 715 to provide additional flexibility to federally insured credit unions regarding financial statement audits. These amendments go into effect January 6, 2020.7 The NCUA has issued a new guide to assist supervisory committees in conducting other supervisory committee audits.