Title 12
SECTION 704.7
704.7 Lending.
§ 704.7 Lending.(a) Policies. A corporate credit union must operate according to a lending policy which addresses, at a minimum:
(1) Loan types and limits;
(2) Required documentation and collateral; and
(3) Analysis and monitoring standards.
(b) General. Each loan or line of credit limit will be determined after analyzing the financial and operational soundness of the borrower and the ability of the borrower to repay the loan.
(c) Loans to members - (1) Credit unions. (i) The maximum aggregate amount in unsecured loans and lines of credit from a corporate credit union to any one member credit union, excluding CLF-related bridge loans and pass-through and guaranteed loans from the CLF and the NCUSIF, must not exceed 50 percent of the corporate credit union's total capital.
(ii) The maximum aggregate amount in secured loans (excluding those secured by shares or marketable securities and member reverse repurchase transactions) and unsecured loans (excluding pass-through and guaranteed loans from the CLF and the NCUSIF) and lines of credit from a corporate credit union to any one member credit union must not exceed 150 percent of the corporate credit union's total capital.
(2) CUSOs. Any loan or line of credit from a corporate credit union to a CUSO must comply with § 704.11.
(3) Other members. The maximum aggregate amount of loans and lines of credit from a corporate credit union to any other one member must not exceed 15 percent of the corporate credit union's total capital plus pledged shares.
(d) Loans to nonmembers - (1) Credit unions. A loan to a nonmember credit union, other than through a loan participation with another corporate credit union or a CLF-related bridge loan, is only permissible if the loan is for an overdraft related to the providing of correspondent services pursuant to § 704.12. Generally, such a loan will have a maturity of one business day.
(2) CUSOs. Any loan or line of credit must comply with § 704.11.
(e) Member business loan rule. Loans, lines of credit and letters of credit to:
(1) Member credit unions are exempt from part 723 of this chapter;
(2) CUSOs are not subject to part 723 of this chapter.
(3) Other members not excluded under § 723.1(b) of this chapter must comply with part 723 of this chapter unless the loan or line of credit is fully guaranteed by a credit union or fully secured by U.S. Treasury or agency securities. Those guaranteed and secured loans must comply with the aggregate limits of § 723.8 but are exempt from the other requirements of part 723.
(f) Participation loans with other corporate credit unions. A corporate credit union is permitted to participate in a loan with another corporate credit union provided the corporate retains an interest of at least 5 percent of the face amount of the loan and a master participation loan agreement is in place before the purchase or the sale of a participation. A participating corporate credit union must exercise the same due diligence as if it were the originating corporate credit union.
(g) Prepayment penalties. If provided for in the loan contract, a corporate credit union is authorized to assess prepayment penalties on loans.
[62 FR 12938, Mar. 19, 1997, as amended at 64 FR 57365, Oct. 25, 1999; 67 FR 65655, Oct. 25, 2002; 68 FR 56550, Oct. 1, 2003; 75 FR 34621, June 18, 2010; 80 FR 25938, May 6, 2015; 80 FR 57284, Sept. 23, 2015; 85 FR 71826, Nov. 12, 2020]