Modernized Occupancy Rule Provides Regulatory Relief

During its final open meeting of 2016, the NCUA Board unanimously approved three items in December:

  • A final rule providing regulatory relief to federal credit unions by eliminating the full occupancy requirement in the current occupancy rule.
  • An interim final rule amending the agency’s Freedom of Information Act regulation to provide even greater agency transparency and to comply with changes in federal law.
  • A request from the Texas Credit Union Department to revise its member business lending rule to provide parity with NCUA’s rule.

In addition, the Chief Financial Officer briefed the Board on the performance of the Temporary Corporate Credit Union Stabilization Fund, which remained in a positive net position.

Finally, NCUA’s Director of Examination and Insurance briefed the Board on the performance of the corporate credit union legacy assets and the NCUA Guaranteed Notes program, updating projections on a possible future Stabilization Fund rebate (see page 1).

Updated Occupancy Rule Will Provide Flexibility

Federal credit unions will have greater flexibility in acquiring and holding property under a final rule (Parts 701 and 721) approved by the NCUA Board.

“We have a goal of providing regulatory relief, whenever possible, while continuing to ensure safety and soundness,” NCUA Board Chairman Rick Metsger said. “This change resulted from listening to credit union stakeholders’ suggestions. It cuts unnecessary paperwork and gives credit union boards the authority to make their own business decisions in this area.”

Once effective on Jan. 20, the final rule will eliminate the requirement that federal credit unions must plan for and eventually reach full occupancy of acquired premises.

Specifically, the final rule modifies the definition of “partially occupy” to mean occupation and use, on a full-time basis, of at least 50 percent of a premises by a federal credit union or by a combination of the federal credit union and a credit union service organization in which the federal credit union has a controlling interest. The modernized rule also keeps the current regulatory timeframes for the partial occupancy of premises.

For more information on the final rule, go to http://go.usa.gov/x92bA.

Rule Makes Required FOIA Changes

NCUA’s Board approved an interim final rule (Part 792) that implements new records disclosure procedures under the Freedom of Information Act, as required by recent changes to federal law adopted by Congress in 2016.

The interim final rule implements new procedures for the disclosure of frequently requested records and electronic records under FOIA, for assessing fees and for resolving disputes through the agency’s FOIA Public Liaison and the Office of Government Information Services, which is part of the National Archives and Records Administration.

While the interim final rule was issued without prior notice and became effective on Dec. 22, the NCUA Board will review and consider public comments, which must be received by Jan. 23. For more information or to submit a comment, go to http://go.usa.gov/x92bG.

Texas Member Business Lending Rule Changes Approved

The NCUA Board approved a request from the Texas Credit Union Department to revise its member business lending rule to provide parity with NCUA’s own rule (Part 723), approved by the Board at its February 2016 open meeting.

Under NCUA’s member business lending rule, states that wish to have their own versions of that rule must receive Board approval.

The Board originally approved the Texas member business lending rule in November 1999 and has approved two previous changes to that rule when the agency has changed its own rule.

The Texas member business lending rule will apply to both federally insured and privately insured credit unions chartered in Texas.

The Texas member business lending rule, which became effective on Jan. 1, is available online at http://go.usa.gov/x8MUH.

Stabilization Fund Remains in a Positive Net Position

For the quarter ending Sept. 30, 2016, the Temporary Corporate Credit Union Stabilization Fund’s net position increased from just over $1 billion to $1.5 billion, continuing its recent trend.

The increase in the Stabilization Fund’s net position resulted primarily from legal recoveries and improvements in projected cash flows related to the legacy assets that secure the NCUA Guaranteed Notes. A reduction in the provision for insurance loss of $472.3 million and guarantee fee income of $7.6 million contributed to the Stabilization Fund’s $478 million net income for the quarter.

The estimate of the fund’s performance is based on the best available preliminary and unaudited information.

On Oct. 24, a $1 billion payment to the U.S. Treasury, from available cash collected after Sept. 30, repaid all outstanding Treasury borrowings, leaving a cash balance of $235.5 million as of Oct. 31.

While the Stabilization Fund continues to have a positive net position for 2016, no funds are available to provide federally insured credit unions with an immediate rebate. Future changes in the economy or in the performance of the legacy assets securing the NCUA Guaranteed Notes are likely to change the value of the assets the agency and the Stabilization Fund eventually can access at the end of the program.

The Stabilization Fund is set to expire in 2021. Only when the Stabilization Fund is closed can rebates be made to credit unions.

Based on current projections, NCUA expects no future Stabilization Fund assessments to credit unions.