Loans to Members and Lines of Credit to Members, 39622-39626 [2018-17087]

Download as PDF 39622 Proposed Rules Federal Register Vol. 83, No. 155 Friday, August 10, 2018 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 701 [RIN 3133–AE88] Loans to Members and Lines of Credit to Members National Credit Union Administration (NCUA). ACTION: Proposed rule. AGENCY: The NCUA Board (Board) proposes to amend its regulations regarding loans to members and lines of credit to members. The proposal would reduce regulatory burden by making amendments to improve clarity and to make compliance easier. Specifically, the Board proposes to make the NCUA’s loan maturity requirements more user friendly by identifying in one section all of the various maturity limits applicable to federal credit union (FCU) loans. The Board also proposes to make explicit in its regulations that the maturity date for a ‘‘new loan’’ under generally accepted accounting principles (GAAP) is calculated from the new date of origination. Additionally, the Board seeks comment on whether the agency should provide longer maturity limits for 1–4 family real estate loans and other loans permitted by the Federal Credit Union Act (FCU Act) such as home improvement, mobile home, and second mortgage loans. Finally, the Board proposes to more clearly express the limits for loans to a single borrower or group of associated borrowers. DATES: Comments must be received on or before October 9, 2018. ADDRESSES: You may submit comments by any of the following methods (Please send comments by one method only): • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • NCUA website: https:// www.ncua.gov/regulation-supervision/ Pages/rules/proposed.aspx. Follow the instructions for submitting comments. daltland on DSKBBV9HB2PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 16:24 Aug 09, 2018 Jkt 244001 • Email: Address to regcomments@ ncua.gov. Include ‘‘[Your name] Comments on Proposed Rule 701, Loans to Members and Lines of Credit to Members’’ in the email subject line. • Fax: (703) 518–6319. Use the subject line described above for email. • Mail: Address to Gerard S. Poliquin, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314– 3428. • Hand Delivery/Courier: Same as mail address. Public Inspection: You may view all public comments on the NCUA’s website at https://www.ncua.gov/ regulation-supervision/Pages/rules/ proposed.aspx as submitted, except for those we cannot post for technical reasons. The NCUA will not edit or remove any identifying or contact information from the public comments submitted. You may inspect paper copies of comments in the NCUA’s law library at 1775 Duke Street, Alexandria, Virginia 22314, by appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, call (703) 518– 6546 or send an email to OGCMail@ ncua.gov. FOR FURTHER INFORMATION CONTACT: Thomas I. Zells, Staff Attorney, Office of General Counsel, at 1775 Duke Street, Alexandria, VA 22314 or telephone: (703) 548–2478. SUPPLEMENTARY INFORMATION: I. Background II. Summary of the Proposed Rule III. Section-by-Section Analysis IV. Regulatory Procedures I. Background In August 2017, the Board published and sought comment on the NCUA’s regulatory reform agenda (Agenda).1 The Agenda identifies those regulations the Board intends to amend or repeal because they are outdated, ineffective, or excessively burdensome.2 A number of the items in the Agenda relate to the NCUA’s regulations on loans to members and lines of credit to members.3 In order to provide 1 82 FR 39702 (Aug. 22, 2017). is consistent with the spirit of President Trump’s regulatory reform agenda and Executive Order 13777. Although the NCUA, as an independent agency, is not required to comply with Executive Order 13777, the Board has chosen to comply with it in spirit and has reviewed all of the NCUA’s regulations to that end. 3 12 CFR 701.21. regulatory relief to credit unions, the Board proposes to address in this rulemaking the substance of several of those items and request further public comment on another. More specifically, the Board proposes to make the NCUA’s regulations on loans to members and lines of credit to members more user friendly by: (1) Identifying in one section the various maturity limits applicable to FCU loans; (2) clarifying that the maturity for a lending action that qualifies as a ‘‘new loan’’ under GAAP is calculated from the new date of origination; 4 (3) seeking comment on whether the NCUA should provide for longer, more flexible maturity limits on certain loans; and (4) more clearly expressing the limits in place for loans to a single borrower or group of associated borrowers. II. Summary of the Proposed Rule A. Loan Maturity Limits for Federal Credit Unions Section 107(5) of the FCU Act grants FCUs the power ‘‘to make loans, the maturities of which shall not exceed 15 years, except as otherwise provided herein. . . .’’ 5 The NCUA implemented this general maturity limit in § 701.21(c)(4) of its regulations. Section 107(5)(A)(i)–(iii) of the FCU Act provide exceptions to the general 15-year maturity limit, and have been implemented in § 701.21(e) through (g) of the NCUA’s regulations. Section 107(5)(A)(i) of the FCU Act, implemented in § 701.21(g) of the NCUA’s regulations, states that ‘‘a residential real estate loan on a one-tofour-family dwelling, including an individual cooperative unit, that is or will be the principal residence of a credit union member, and which is secured by a first lien upon such dwelling, may have a maturity not exceeding thirty years or such other limits as shall be set by the National Credit Union Administration Board (except that a loan on an individual cooperative unit shall be adequately secured as defined by the Board), subject to the rules and regulations of the Board[.]’’ 6 Pursuant to the authority 2 This PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 4 GAAP is defined as generally accepted accounting principles in the United States as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). 5 12 U.S.C. 1757(5). 6 12 U.S.C. 1757(5)(A)(i) (emphasis added); 12 CFR 701.21(g). E:\FR\FM\10AUP1.SGM 10AUP1 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules § 107(5)(A)(i) of the FCU Act grants the Board to set alternate maturities for covered 1–4 family real estate loans, the Board has established a 40-year maximum maturity for such loans and has provided that longer periods may be permitted by the Board on a case-bycase basis.7 Section 107(5)(A)(ii) of the FCU Act, implemented in § 701.21(f) of the NCUA’s regulations, states that ‘‘a loan to finance the purchase of a mobile home, which shall be secured by a first lien on such mobile home, to be used by the credit union member as his residence, a loan for the repair, alteration, or improvement of a residential dwelling which is the residence of a credit union member, or a second mortgage loan secured by a residential dwelling which is the residence of a credit union member, shall have a maturity not to exceed 15 years or any longer term which the Board may allow[.]’’ 8 Pursuant to the authority section 107(5)(A)(ii) grants the Board to set alternate maturities for covered loans, the Board has established a 20-year maximum maturity for such loans.9 Finally, section 107(5)(A)(iii) of the FCU Act, implemented in § 701.21(e) of the NCUA’s regulations, states that ‘‘a loan secured by the insurance or guarantee of, or with advance commitment to purchase the loan by, the Federal Government, a State government, or any agency of either may be made for the maturity and under the terms and conditions specified in the law under which such insurance, guarantee, or commitment is provided[.]’’ 10 daltland on DSKBBV9HB2PROD with PROPOSALS i. Identifying the Various Maturity Limits in One Section Presently, § 701.21 of the NCUA’s regulations addresses various loan maturity limits in paragraphs (c), (e), (f), and (g). Paragraph (c) provides the general rules applicable to all loans to members and, where indicated, all lines of credit (including credit cards) to members, except as otherwise provided in the remaining provisions of § 701.21. Paragraph (c)(4) implements the general 15-year maturity limit that section 7 12 CFR 701.21(g)(1) (stating that ‘‘[a] federal credit union may make residential real estate loans to members, including loans secured by manufactured homes permanently affixed to the land, with maturities of up to 40 years, or such longer period as may be permitted by the NCUA Board on a case-by-case basis, subject to the conditions of this paragraph[.]’’). 8 12 U.S.C. 1757(5)(A)(ii) (emphasis added); 12 CFR 701.21(f). 9 12 CFR 701.21(f)(1) (stating that ‘‘[n]otwithstanding the general 15-year maturity limit on loans to members, a federal credit union may make loans with maturities of up to 20 years’’ for loans covered by this paragraph.). 10 12 U.S.C. 1757(5)(A)(iii); 12 CFR 701.21(e). VerDate Sep<11>2014 16:24 Aug 09, 2018 Jkt 244001 107(5) of the FCU Act places on loans to members. Paragraphs (e), (f), and (g) of § 701.21 implement the three exceptions to this general 15-year limit that appear in section 107(5)(A)(i)–(iii) of the FCU Act. Having the various maturity limits spread among numerous sections of the NCUA’s regulations, often separated by large amounts of regulatory text unrelated to maturities, can be confusing to the reader and makes it more difficult to understand the lending regulations. To remedy this, the Board proposes to make the NCUA’s loan maturity requirements more understandable and user-friendly by identifying in one section (§ 701.21(c)(4)), including crosscitations, all of the maturity limits applicable to FCU loans. ii. The Treatment of Maturities for Lending Actions That Qualify as ‘‘New Loans’’ Under GAAP The proposal also clarifies that in the case of a lending action qualifying as a ‘‘new loan’’ under GAAP, the maturity limit is calculated from the new date of origination.11 The Board proposes to accomplish this by adding language to § 701.21(c)(4), which articulates the general 15-year maturity limit. iii. Request for Comment on Providing Longer Maturity Limits for Certain Loans The Board is considering providing longer maturity limits for 1–4 family real estate loans and other loans (such as certain home improvement, mobile home, and second mortgage loans) as permitted by section 107(5)(A)(i)–(ii) of the FCU Act and removing the case-bycase exception the Board can grant. As discussed earlier, these maturity limits are implemented in § 701.21(f) and (g) of the NCUA’s regulations. The case-bycase exception is located in § 701.21(g)(1) of the NCUA’s regulations and provides that the Board can permit an FCU to make loans with maturities that exceed the regulation’s 40-year limit ‘‘on a case-by-case basis, subject to the conditions of this paragraph (g).’’ 12 The Board believes that more input is necessary to determine whether longer maturity limits should be adopted and, if so, the proper maturity lengths and the reasons such longer maturities are warranted. As such, the Board asks that commenters provide detailed comments addressing: (1) Whether the NCUA should provide longer maturity limits for certain lending actions permitted by section 107(5)(A)(i)–(ii) of the FCU Act; (2) the appropriate maturity limits for such lending actions; (3) whether the case-by-case Board exemption should be retained and, if so, under what circumstances would such exemptions be appropriate; and (4) any other issues stakeholders believe relevant. The Board also requests that commenters consider FCU Act limitations when requesting relief and changes in this area. B. Single Borrower and Group of Associated Borrowers Limits i. More Clearly Identifying the Various Limits Currently, three provisions of the NCUA’s regulations address limits on loans to a single borrower or group of associated borrowers: (1) § 701.21(c)(5) addresses the general limit; (2) § 701.22(b)(5)(iv) addresses the limit on loan participations; and (3) § 723.4(c) addresses the limit on commercial loans. Because these provisions are spread among several sections of the NCUA’s regulations, some stakeholders are not aware that there are multiple limits that apply in different contexts. To rectify this, the proposal makes clear that all three of these limits exist. Rather than move the loans to one borrower or group of associated borrowers limits that specifically apply to loan participations and commercial loans from their current regulatory sections to the general limit section, the Board proposes to include cross-citations to the more specific loan participation and commercial loan limits in the general limit section (§ 701.21(c)(5)). The Board believes that inserting cross-citations is a more efficient and user friendly way to identify that there are multiple lending limits throughout the NCUA’s regulations. Section 701.21(c)(5), as part of the general rules on loans and lines of credit to members, imposes the FCU Act’s ten percent limit on loans and lines of credit to any member.13 Specifically, § 701.21(c)(5) requires that ‘‘[n]o loan or line of credit advance may be made to any member if such loan or advance would cause that member to be indebted to the Federal credit union upon loans and advances made to the member in the aggregate amount exceeding 10% of the credit union’s total unimpaired capital and surplus.’’ 14 Section 701.21(c)(5) also provides an outdated cross-citation to part 723 for the specific limit on commercial lending. The Board proposes to remove this outdated crosscitation and provide updated references to both the current loan participation 11 ASC 13 12 12 12 14 12 PO 00000 310–20–35–9 & 10. CFR 701.21(g)(1). Frm 00002 Fmt 4702 Sfmt 4702 39623 E:\FR\FM\10AUP1.SGM U.S.C. 1757(5)(A)(x). CFR 701.21(c)(5). 10AUP1 39624 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules daltland on DSKBBV9HB2PROD with PROPOSALS limit in § 701.22(b)(5) and the commercial lending limit in § 723.4(c). The NCUA also proposes to make conforming amendments to update cross-citations to the single borrower and group of associated borrower limits in §§ 701.20(c)(2) and 701.22(b)(1). ii. Request for Comment Regarding the Limits Applicable to Loan Participations and Commercial Loans In addition, the NCUA believes that providing a universal standard limit for loans to a single borrower or group of associated borrowers, in lieu of the current loan product specific standards, may help facilitate compliance and reduce regulatory burden. As such, the agency seeks stakeholder input on whether the agency should provide such a universal standard limit. Currently, a limit of 15 percent of a federally insured credit union’s net worth exists for both commercial loans and loan participations that may be purchased with respect to a single borrower or group of associated borrowers. However, a waiver is available in the case of the loan participations limit and an alternate limit is available for commercial loans. More specifically, the 15 percent limit on the aggregate amount of loan participations that may be purchased with respect to a single borrower or group of associated borrowers can be waived by the appropriate regional director, and, in the case of a federally insured, state-chartered credit union, with prior written concurrence of the appropriate state supervisory authority.15 The limit on commercial loans does not provide for waiver. Instead, it provides that ‘‘the aggregate dollar amount of commercial loans to any one borrower or group of associated borrowers may not exceed the greater of 15 percent of the federally insured credit union’s net worth or $100,000, plus an additional 10 percent of the credit union’s net worth if the amount that exceeds the credit union’s 15 percent general limit is fully secured at all times with a perfected security interest by readily marketable collateral as defined in § 723.2 of this part. Any insured or guaranteed portion of a commercial loan made through a program in which a federal or state agency (or its political subdivision) insures repayment, guarantees repayment, or provides an advance commitment to purchase the loan in full, is excluded from this limit.’’ 16 The Board believes that more input is necessary to determine whether a universal limit would be beneficial and should be adopted in place of the current product specific limits. As such, the Board asks that commenters provide comments addressing: (1) Whether the NCUA should provide a single universal standard limit for commercial loans and loan participations that may be purchased with respect to a single borrower or group of associated borrowers; (2) if so, the appropriate limit for such a standard; (3) if not, why not; and (4) any other issues stakeholders believe are relevant to this determination. The Board also requests that commenters consider FCU Act limitations, specifically the general limit on loans to a single borrower of ‘‘10 per centum of the credit union’s unimpaired capital and surplus’’ in section 107(5)(A)(x), when commenting.17 III. Section-by-Section Analysis This proposed rule reduces regulatory burden and makes the NCUA’s regulations more user-friendly for credit unions. As such, it is largely clarifying and technical in nature and would maintain most of the current language in § 701.21. The proposed changes to § 701.21 and the conforming amendments to §§ 701.20 and 701.22 are discussed in more detail below.18 Section 701.20 Suretyship and Guaranty The proposal would make minor conforming amendments to § 701.20(c). The proposal would make conforming amendments to the section governing requirements for suretyship or guaranty agreements by removing outdated crosscitations to the loans to one borrower or group of associated borrowers limit in §§ 723.2 and 723.8 of the member business lending regulation and adding updated cross-citations to 701.22(b)(5)(iv) of the NCUA’s loan participation regulation and 723.4(c) of the NCUA’s member business lending regulation. Section 701.21 The proposal would divide current § 701.21(c)(4) into two new subparagraphs. One paragraph, § 701.21(c)(4)(i), would state the general rule that loans carry a 15-year maturity. The other, § 701.21(c)(4)(ii), would make more explicit that there are exceptions to the general 15-year maturity limit in § 701.21 (e) through (g) for various types of credit union loans. The proposal would maintain all of current § 701.21(c)(4) in proposed 17 12 U.S.C. 1757(5)(A)(x). citations to §§ 701.20, 701.21, 701.22, and part 723 in this preamble section refer to the NCUA’s regulations in 12 CFR chapter VII. 18 All 15 12 16 12 CFR 701.22(b)(5)(iv). CFR 723.4(c). VerDate Sep<11>2014 16:24 Aug 09, 2018 Jkt 244001 PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 § 701.21(c)(4)(i), which articulates the general 15-year maturity limit that exists on FCU loans. However, the proposal also would add language to clarify that the maturity for a lending action that qualifies as a new loan under GAAP is calculated from the new date of origination. Section 701.21(c)(4)(ii) of the proposal would explicitly state, in three subparagraphs, that three exceptions exist to the general 15-year maturity limit and cross-cite to §§ 701.21(e)–(g), which detail them as follows: Paragraph (c)(4)(ii)(A) of the proposal would explicitly cross-cite to the exception to the general 15-year maturity limit that exists in § 701.21(e) regarding covered loans secured, in full or in part, by the insurance or guarantee of, or with an advance commitment to purchase the loan, in full or in part, by the Federal Government, a State government or any agency of either. Paragraph (c)(4)(ii)(B) of the proposal would explicitly cross-cite to the exception to the general 15-year maturity limit that exists in § 701.21(f) regarding covered home improvement, mobile home, and second mortgage loans. Paragraph (c)(4)(ii)(C) of the proposal would explicitly cross-cite to the exception to the general 15-year maturity limit that exists in § 701.21(g) regarding covered 1–4 family real estate loans. The proposal would revise § 701.21(c)(5) to add cross-citations to the specific requirements that exist on loans to a single borrower or group of associated borrowers in the loan participation rule, § 701.22(b)(5)(iv), and member business lending rule, § 723.4(c). The proposal would revise § 701.21(e) to make more explicit that the maturity limits applicable to loans covered by paragraph (e) are notwithstanding the general 15-year limit in paragraph (c)(4). The proposal would also add a crosscitation to paragraph (c)(4). The proposal would retain almost all of current § 701.21(f), but would insert some additional language to improve clarity. The proposal would revise § 701.21(f)(1) to make more explicit that the maturity limit applicable to loans covered by paragraph (f) is notwithstanding the general 15-year limit in paragraph (c)(4). The proposal would also add a cross-citation to paragraph (c)(4). The proposal would retain almost all of current § 701.21(g), but would insert some additional language to improve clarity. E:\FR\FM\10AUP1.SGM 10AUP1 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules The proposal would revise § 701.21(g)(1) to make more explicit that the maturity limit applicable to loans covered by paragraph (g) is notwithstanding the general 15-year limit in paragraph (c)(4). The proposal would also add a cross-citation to paragraph (c)(4). Section 701.22 As described in more detail below, the proposal would make minor conforming amendments to § 701.22(b) regarding loan participations. The proposal would update the crosscitation in § 701.22(b)(1), which provides that for a federally insured credit union to purchase a participation interest in a loan, the loan must comply with all regulatory requirements to the same extent as if the purchasing federally insured credit union had originated the loan. Specifically, the cross-reference in § 701.22(b)(1) is outdated and would be changed from § 723.8 to § 723.4(c). IV. Regulatory Procedures daltland on DSKBBV9HB2PROD with PROPOSALS A. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities. A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include credit unions with assets less than $100 million) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule. The proposed rule reduces regulatory burden through clarifying and technical changes and will not have an impact on small credit unions. Accordingly, the NCUA certifies that the proposed rule will not have a significant economic impact on a substantial number of small credit unions. B. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in which an agency creates new or amends existing information collection requirements.19 For purposes of the PRA, an information collection requirement may take the form of a reporting, recordkeeping, or a thirdparty disclosure requirement. The proposed rule does not contain information collection requirements that require approval by OMB under the PRA.20 The proposed rule would only make clarifying and technical changes. ■ C. Executive Order 13132 § 701.21 Loans to members and lines of credit to members. Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. In adherence to fundamental federalism principles, the NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order. This rulemaking will not have a substantial direct effect on the states, on the connection between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. The NCUA has determined that this proposal does not constitute a policy that has federalism implications for purposes of the executive order. D. Assessment of Federal Regulations and Policies on Families The NCUA has determined that this final rule will not affect family wellbeing within the meaning of Section 654 of the Treasury and General Government Appropriations Act, 1999.21 List of Subjects in 12 CFR Part 701 Credit, Credit unions, Reporting and recordkeeping requirements. By the National Credit Union Administration Board on August 2, 2018. Gerard Poliquin, Secretary of the Board. For the reasons discussed above, the NCUA Board proposes to amend 12 CFR part 701 as follows: PART 701—ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS 1. The authority citation for part 701 continues to read as follows: ■ Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601– 3610. Section 701.35 is also authorized by 42 U.S.C. 4311–4312. § 701.20 U.S.C. 3507(d); 5 CFR part 1320. VerDate Sep<11>2014 16:24 Aug 09, 2018 Jkt 244001 [Amended] 2. Amend § 701.20(c)(2) by removing the citation ‘‘723.2 and 723.8’’ and adding in its place ‘‘701.22(b)(5)(iv) and 723.4(c)’’. ■ 20 44 19 44 39625 U.S.C. chap. 35. Law 105–277, 112 Stat. 2681 (1998). 21 Public PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 3. Amend § 701.21 by revising paragraphs (c)(4) and (5), (e), (f)(1) introductory text, and (g)(1) to read as follows: * * * * * (c) * * * (4) Maturity—(i) In general. The maturity of a loan to a member may not exceed 15 years. Lines of credit are not subject to a statutory or regulatory maturity limit. Amortization of line of credit balances and the type and amount of security on any line of credit shall be as determined by contract between the Federal credit union and the member/ borrower. In the case of a lending action that qualifies as a ‘‘new loan’’ under GAAP, the new loan’s maturity is calculated from the new date of origination. (ii) Exceptions. Notwithstanding the general 15-year maturity limit on loans to members, a federal credit union may make loans with maturities: (A) As specified in the law, regulations or program under which a loan is secured, in full or in part, by the insurance or guarantee of, or with an advance commitment to purchase the loan, in full or in part, by the Federal Government, a State government or any agency of either, as provided in paragraph (e) of this section; (B) Of up to 20 years or such longer term as is provided in paragraph (f) of this section; and (C) Of up to 40 years or such longer term as is provided in paragraph (g) of this section. (5) Ten percent limit. No loan or line of credit advance may be made to any member if such loan or advance would cause that member to be indebted to the Federal credit union upon loans and advances made to the member in an aggregate amount exceeding 10% of the credit union’s total unimpaired capital and surplus. In the case of loan participations as defined in § 701.22(a) of this part and commercial loans as defined in § 723.2 of this chapter, additional limitations apply as set forth in § 701.22(b)(5)(iv) of this part and § 723.4(c) of this chapter. * * * * * (e) Insured, guaranteed and advance commitment loans. Notwithstanding the general 15-year maturity limit on loans to members in paragraph (c)(4) of this section, a loan secured, in full or in part, by the insurance or guarantee of, or with an advance commitment to purchase the loan, in full or in part, by the Federal Government, a State government or any agency of either, may be made for the maturity and under the terms and E:\FR\FM\10AUP1.SGM 10AUP1 39626 Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / Proposed Rules conditions, including rate of interest, specified in the law, regulations or program under which the insurance, guarantee or commitment is provided. (f) 20-year loans. (1) Notwithstanding the general 15-year maturity limit on loans to members in paragraph (c)(4) of this section, a federal credit union may make loans with maturities of up to 20 years in the case of: * * * * * (g) Long-term mortgage loans—(1) Authority. Notwithstanding the general 15-year maturity limit on loans to members in paragraph (c)(4) of this section, a federal credit union may make residential real estate loans to members, including loans secured by manufactured homes permanently affixed to the land, with maturities of up to 40 years, or such longer period as may be permitted by the NCUA Board on a case-by-case basis, subject to the conditions of this paragraph (g). * * * * * We must receive comments on this proposed AD by September 24, 2018. DATES: [FR Doc. 2018–17087 Filed 8–9–18; 8:45 am] You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods: • Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments. • Fax: 202–493–2251. • Mail: U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE, Washington, DC 20590. • Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. For service information identified in this NPRM, contact Dassault Falcon Jet Corporation, Teterboro Airport, P.O. Box 2000, South Hackensack, NJ 07606; telephone 201–440–6700; internet http://www.dassaultfalcon.com. You may view this service information at the FAA, Transport Standards Branch, 2200 South 216th St., Des Moines, WA. For information on the availability of this material at the FAA, call 206–231–3195. BILLING CODE 7535–01–P Examining the AD Docket § 701.22 [Amended] 3. Amend § 701.22(b)(1) by removing the citation ‘‘§ 723.8’’ and adding in its place ‘‘§ 723.4’’. ■ DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2018–0642; Product Identifier 2018–NM–087–AD] RIN 2120–AA64 Airworthiness Directives; Dassault Aviation Airplanes Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM). AGENCY: We propose to adopt a new airworthiness directive (AD) for all Dassault Aviation Model Falcon 10 airplanes. This proposed AD was prompted by a determination that more restrictive maintenance requirements and airworthiness limitations are necessary. This proposed AD would require revising the maintenance or inspection program, as applicable, to incorporate new or more restrictive maintenance requirements and airworthiness limitations. We are proposing this AD to address the unsafe condition on these products. daltland on DSKBBV9HB2PROD with PROPOSALS SUMMARY: VerDate Sep<11>2014 16:24 Aug 09, 2018 Jkt 244001 ADDRESSES: You may examine the AD docket on the internet at http:// www.regulations.gov by searching for and locating Docket No. FAA–2018– 0642; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this NPRM, the regulatory evaluation, any comments received, and other information. The street address for Docket Operations (phone: 800–647–5527) is in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt. FOR FURTHER INFORMATION CONTACT: Tom Rodriguez, Aerospace Engineer, International Section, Transport Standards Branch, FAA, 2200 South 216th St., Des Moines, WA 98198; telephone and fax 206–231–3226. SUPPLEMENTARY INFORMATION: Comments Invited We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the ADDRESSES section. Include ‘‘Docket No. FAA– 2018–0642; Product Identifier 2018– NM–087–AD’’ at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this NPRM. We will consider PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 all comments received by the closing date and may amend this NPRM because of those comments. We will post all comments we receive, without change, to http:// www.regulations.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this NPRM. Discussion The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD 2018–0078, dated April 9, 2018 (referred to after this as the Mandatory Continuing Airworthiness Information, or ‘‘the MCAI’’), to correct an unsafe condition for all Dassault Aviation Model Falcon 10 airplanes. The MCAI states: The airworthiness limitations and certification maintenance instructions for the Dassault Falcon 10 aeroplanes, which are approved by EASA, are currently defined and published in the Dassault Falcon 10 [Airplane Maintenance Manual] AMM, Chapter 5–40. These instructions have been identified as mandatory for continued airworthiness. Failure to accomplish these instructions could result in an unsafe condition [fatigue cracking and damage in principal structural elements, which could result in reduced structural integrity of the airplane.] Previously, EASA issued AD 2008–0221 to require accomplishment of the maintenance tasks, and implementation of the airworthiness limitations, as specified in the Dassault Falcon 10 AMM, Chapter 5–40, at Revision 8. Since that [EASA] AD was issued, Dassault issued the [Airworthiness Limitations Section] ALS, which introduces new and more restrictive maintenance requirements and/or airworthiness limitations. For the reason described above, this [EASA] AD takes over the requirements for Falcon 10 aeroplanes from EASA AD 2008– 0221, and requires accomplishment of the actions specified in the ALS. You may examine the MCAI in the AD docket on the internet at http:// www.regulations.gov by searching for and locating Docket No. FAA–2018– 0642. Related Service Information Under 1 CFR Part 51 Dassault has issued Falcon 10 Maintenance Manual, Airworthiness Limitations, Chapter 5–40–00, Revision 13, dated July 2017. This service information describes repetitive mandatory maintenance tasks. This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in the ADDRESSES section. E:\FR\FM\10AUP1.SGM 10AUP1

Agencies

[Federal Register Volume 83, Number 155 (Friday, August 10, 2018)]
[Proposed Rules]
[Pages 39622-39626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17087]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 83, No. 155 / Friday, August 10, 2018 / 
Proposed Rules

[[Page 39622]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

[RIN 3133-AE88]


Loans to Members and Lines of Credit to Members

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The NCUA Board (Board) proposes to amend its regulations 
regarding loans to members and lines of credit to members. The proposal 
would reduce regulatory burden by making amendments to improve clarity 
and to make compliance easier. Specifically, the Board proposes to make 
the NCUA's loan maturity requirements more user friendly by identifying 
in one section all of the various maturity limits applicable to federal 
credit union (FCU) loans. The Board also proposes to make explicit in 
its regulations that the maturity date for a ``new loan'' under 
generally accepted accounting principles (GAAP) is calculated from the 
new date of origination. Additionally, the Board seeks comment on 
whether the agency should provide longer maturity limits for 1-4 family 
real estate loans and other loans permitted by the Federal Credit Union 
Act (FCU Act) such as home improvement, mobile home, and second 
mortgage loans. Finally, the Board proposes to more clearly express the 
limits for loans to a single borrower or group of associated borrowers.

DATES: Comments must be received on or before October 9, 2018.

ADDRESSES: You may submit comments by any of the following methods 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA website: https://www.ncua.gov/regulation-supervision/Pages/rules/proposed.aspx. Follow the instructions for submitting 
comments.
     Email: Address to [email protected]. Include ``[Your 
name] Comments on Proposed Rule 701, Loans to Members and Lines of 
Credit to Members'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard S. Poliquin, Secretary of the 
Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You may view all public comments on the NCUA's 
website at https://www.ncua.gov/regulation-supervision/Pages/rules/proposed.aspx as submitted, except for those we cannot post for 
technical reasons. The NCUA will not edit or remove any identifying or 
contact information from the public comments submitted. You may inspect 
paper copies of comments in the NCUA's law library at 1775 Duke Street, 
Alexandria, Virginia 22314, by appointment weekdays between 9 a.m. and 
3 p.m. To make an appointment, call (703) 518-6546 or send an email to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Thomas I. Zells, Staff Attorney, 
Office of General Counsel, at 1775 Duke Street, Alexandria, VA 22314 or 
telephone: (703) 548-2478.

SUPPLEMENTARY INFORMATION:

I. Background
II. Summary of the Proposed Rule
III. Section-by-Section Analysis
IV. Regulatory Procedures

I. Background

    In August 2017, the Board published and sought comment on the 
NCUA's regulatory reform agenda (Agenda).\1\ The Agenda identifies 
those regulations the Board intends to amend or repeal because they are 
outdated, ineffective, or excessively burdensome.\2\
---------------------------------------------------------------------------

    \1\ 82 FR 39702 (Aug. 22, 2017).
    \2\ This is consistent with the spirit of President Trump's 
regulatory reform agenda and Executive Order 13777. Although the 
NCUA, as an independent agency, is not required to comply with 
Executive Order 13777, the Board has chosen to comply with it in 
spirit and has reviewed all of the NCUA's regulations to that end.
---------------------------------------------------------------------------

    A number of the items in the Agenda relate to the NCUA's 
regulations on loans to members and lines of credit to members.\3\ In 
order to provide regulatory relief to credit unions, the Board proposes 
to address in this rulemaking the substance of several of those items 
and request further public comment on another. More specifically, the 
Board proposes to make the NCUA's regulations on loans to members and 
lines of credit to members more user friendly by: (1) Identifying in 
one section the various maturity limits applicable to FCU loans; (2) 
clarifying that the maturity for a lending action that qualifies as a 
``new loan'' under GAAP is calculated from the new date of origination; 
\4\ (3) seeking comment on whether the NCUA should provide for longer, 
more flexible maturity limits on certain loans; and (4) more clearly 
expressing the limits in place for loans to a single borrower or group 
of associated borrowers.
---------------------------------------------------------------------------

    \3\ 12 CFR 701.21.
    \4\ GAAP is defined as generally accepted accounting principles 
in the United States as set forth in the Financial Accounting 
Standards Board's (FASB) Accounting Standards Codification (ASC).
---------------------------------------------------------------------------

II. Summary of the Proposed Rule

A. Loan Maturity Limits for Federal Credit Unions

    Section 107(5) of the FCU Act grants FCUs the power ``to make 
loans, the maturities of which shall not exceed 15 years, except as 
otherwise provided herein. . . .'' \5\ The NCUA implemented this 
general maturity limit in Sec.  701.21(c)(4) of its regulations. 
Section 107(5)(A)(i)-(iii) of the FCU Act provide exceptions to the 
general 15-year maturity limit, and have been implemented in Sec.  
701.21(e) through (g) of the NCUA's regulations. Section 107(5)(A)(i) 
of the FCU Act, implemented in Sec.  701.21(g) of the NCUA's 
regulations, states that ``a residential real estate loan on a one-to-
four-family dwelling, including an individual cooperative unit, that is 
or will be the principal residence of a credit union member, and which 
is secured by a first lien upon such dwelling, may have a maturity not 
exceeding thirty years or such other limits as shall be set by the 
National Credit Union Administration Board (except that a loan on an 
individual cooperative unit shall be adequately secured as defined by 
the Board), subject to the rules and regulations of the Board[.]'' \6\ 
Pursuant to the authority

[[Page 39623]]

Sec.  107(5)(A)(i) of the FCU Act grants the Board to set alternate 
maturities for covered 1-4 family real estate loans, the Board has 
established a 40-year maximum maturity for such loans and has provided 
that longer periods may be permitted by the Board on a case-by-case 
basis.\7\ Section 107(5)(A)(ii) of the FCU Act, implemented in Sec.  
701.21(f) of the NCUA's regulations, states that ``a loan to finance 
the purchase of a mobile home, which shall be secured by a first lien 
on such mobile home, to be used by the credit union member as his 
residence, a loan for the repair, alteration, or improvement of a 
residential dwelling which is the residence of a credit union member, 
or a second mortgage loan secured by a residential dwelling which is 
the residence of a credit union member, shall have a maturity not to 
exceed 15 years or any longer term which the Board may allow[.]'' \8\ 
Pursuant to the authority section 107(5)(A)(ii) grants the Board to set 
alternate maturities for covered loans, the Board has established a 20-
year maximum maturity for such loans.\9\ Finally, section 
107(5)(A)(iii) of the FCU Act, implemented in Sec.  701.21(e) of the 
NCUA's regulations, states that ``a loan secured by the insurance or 
guarantee of, or with advance commitment to purchase the loan by, the 
Federal Government, a State government, or any agency of either may be 
made for the maturity and under the terms and conditions specified in 
the law under which such insurance, guarantee, or commitment is 
provided[.]'' \10\
---------------------------------------------------------------------------

    \5\ 12 U.S.C. 1757(5).
    \6\ 12 U.S.C. 1757(5)(A)(i) (emphasis added); 12 CFR 701.21(g).
    \7\ 12 CFR 701.21(g)(1) (stating that ``[a] federal credit union 
may make residential real estate loans to members, including loans 
secured by manufactured homes permanently affixed to the land, with 
maturities of up to 40 years, or such longer period as may be 
permitted by the NCUA Board on a case-by-case basis, subject to the 
conditions of this paragraph[.]'').
    \8\ 12 U.S.C. 1757(5)(A)(ii) (emphasis added); 12 CFR 701.21(f).
    \9\ 12 CFR 701.21(f)(1) (stating that ``[n]otwithstanding the 
general 15-year maturity limit on loans to members, a federal credit 
union may make loans with maturities of up to 20 years'' for loans 
covered by this paragraph.).
    \10\ 12 U.S.C. 1757(5)(A)(iii); 12 CFR 701.21(e).
---------------------------------------------------------------------------

i. Identifying the Various Maturity Limits in One Section
    Presently, Sec.  701.21 of the NCUA's regulations addresses various 
loan maturity limits in paragraphs (c), (e), (f), and (g). Paragraph 
(c) provides the general rules applicable to all loans to members and, 
where indicated, all lines of credit (including credit cards) to 
members, except as otherwise provided in the remaining provisions of 
Sec.  701.21. Paragraph (c)(4) implements the general 15-year maturity 
limit that section 107(5) of the FCU Act places on loans to members. 
Paragraphs (e), (f), and (g) of Sec.  701.21 implement the three 
exceptions to this general 15-year limit that appear in section 
107(5)(A)(i)-(iii) of the FCU Act.
    Having the various maturity limits spread among numerous sections 
of the NCUA's regulations, often separated by large amounts of 
regulatory text unrelated to maturities, can be confusing to the reader 
and makes it more difficult to understand the lending regulations. To 
remedy this, the Board proposes to make the NCUA's loan maturity 
requirements more understandable and user-friendly by identifying in 
one section (Sec.  701.21(c)(4)), including cross-citations, all of the 
maturity limits applicable to FCU loans.
ii. The Treatment of Maturities for Lending Actions That Qualify as 
``New Loans'' Under GAAP
    The proposal also clarifies that in the case of a lending action 
qualifying as a ``new loan'' under GAAP, the maturity limit is 
calculated from the new date of origination.\11\ The Board proposes to 
accomplish this by adding language to Sec.  701.21(c)(4), which 
articulates the general 15-year maturity limit.
---------------------------------------------------------------------------

    \11\ ASC 310-20-35-9 & 10.
---------------------------------------------------------------------------

iii. Request for Comment on Providing Longer Maturity Limits for 
Certain Loans
    The Board is considering providing longer maturity limits for 1-4 
family real estate loans and other loans (such as certain home 
improvement, mobile home, and second mortgage loans) as permitted by 
section 107(5)(A)(i)-(ii) of the FCU Act and removing the case-by-case 
exception the Board can grant. As discussed earlier, these maturity 
limits are implemented in Sec.  701.21(f) and (g) of the NCUA's 
regulations. The case-by-case exception is located in Sec.  
701.21(g)(1) of the NCUA's regulations and provides that the Board can 
permit an FCU to make loans with maturities that exceed the 
regulation's 40-year limit ``on a case-by-case basis, subject to the 
conditions of this paragraph (g).'' \12\ The Board believes that more 
input is necessary to determine whether longer maturity limits should 
be adopted and, if so, the proper maturity lengths and the reasons such 
longer maturities are warranted. As such, the Board asks that 
commenters provide detailed comments addressing: (1) Whether the NCUA 
should provide longer maturity limits for certain lending actions 
permitted by section 107(5)(A)(i)-(ii) of the FCU Act; (2) the 
appropriate maturity limits for such lending actions; (3) whether the 
case-by-case Board exemption should be retained and, if so, under what 
circumstances would such exemptions be appropriate; and (4) any other 
issues stakeholders believe relevant. The Board also requests that 
commenters consider FCU Act limitations when requesting relief and 
changes in this area.
---------------------------------------------------------------------------

    \12\ 12 CFR 701.21(g)(1).
---------------------------------------------------------------------------

B. Single Borrower and Group of Associated Borrowers Limits

i. More Clearly Identifying the Various Limits
    Currently, three provisions of the NCUA's regulations address 
limits on loans to a single borrower or group of associated borrowers: 
(1) Sec.  701.21(c)(5) addresses the general limit; (2) Sec.  
701.22(b)(5)(iv) addresses the limit on loan participations; and (3) 
Sec.  723.4(c) addresses the limit on commercial loans. Because these 
provisions are spread among several sections of the NCUA's regulations, 
some stakeholders are not aware that there are multiple limits that 
apply in different contexts. To rectify this, the proposal makes clear 
that all three of these limits exist. Rather than move the loans to one 
borrower or group of associated borrowers limits that specifically 
apply to loan participations and commercial loans from their current 
regulatory sections to the general limit section, the Board proposes to 
include cross-citations to the more specific loan participation and 
commercial loan limits in the general limit section (Sec.  
701.21(c)(5)). The Board believes that inserting cross-citations is a 
more efficient and user friendly way to identify that there are 
multiple lending limits throughout the NCUA's regulations.
    Section 701.21(c)(5), as part of the general rules on loans and 
lines of credit to members, imposes the FCU Act's ten percent limit on 
loans and lines of credit to any member.\13\ Specifically, Sec.  
701.21(c)(5) requires that ``[n]o loan or line of credit advance may be 
made to any member if such loan or advance would cause that member to 
be indebted to the Federal credit union upon loans and advances made to 
the member in the aggregate amount exceeding 10% of the credit union's 
total unimpaired capital and surplus.'' \14\ Section 701.21(c)(5) also 
provides an outdated cross-citation to part 723 for the specific limit 
on commercial lending. The Board proposes to remove this outdated 
cross-citation and provide updated references to both the current loan 
participation

[[Page 39624]]

limit in Sec.  701.22(b)(5) and the commercial lending limit in Sec.  
723.4(c).
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 1757(5)(A)(x).
    \14\ 12 CFR 701.21(c)(5).
---------------------------------------------------------------------------

    The NCUA also proposes to make conforming amendments to update 
cross-citations to the single borrower and group of associated borrower 
limits in Sec. Sec.  701.20(c)(2) and 701.22(b)(1).
ii. Request for Comment Regarding the Limits Applicable to Loan 
Participations and Commercial Loans
    In addition, the NCUA believes that providing a universal standard 
limit for loans to a single borrower or group of associated borrowers, 
in lieu of the current loan product specific standards, may help 
facilitate compliance and reduce regulatory burden. As such, the agency 
seeks stakeholder input on whether the agency should provide such a 
universal standard limit. Currently, a limit of 15 percent of a 
federally insured credit union's net worth exists for both commercial 
loans and loan participations that may be purchased with respect to a 
single borrower or group of associated borrowers. However, a waiver is 
available in the case of the loan participations limit and an alternate 
limit is available for commercial loans.
    More specifically, the 15 percent limit on the aggregate amount of 
loan participations that may be purchased with respect to a single 
borrower or group of associated borrowers can be waived by the 
appropriate regional director, and, in the case of a federally insured, 
state-chartered credit union, with prior written concurrence of the 
appropriate state supervisory authority.\15\ The limit on commercial 
loans does not provide for waiver. Instead, it provides that ``the 
aggregate dollar amount of commercial loans to any one borrower or 
group of associated borrowers may not exceed the greater of 15 percent 
of the federally insured credit union's net worth or $100,000, plus an 
additional 10 percent of the credit union's net worth if the amount 
that exceeds the credit union's 15 percent general limit is fully 
secured at all times with a perfected security interest by readily 
marketable collateral as defined in Sec.  723.2 of this part. Any 
insured or guaranteed portion of a commercial loan made through a 
program in which a federal or state agency (or its political 
subdivision) insures repayment, guarantees repayment, or provides an 
advance commitment to purchase the loan in full, is excluded from this 
limit.'' \16\
---------------------------------------------------------------------------

    \15\ 12 CFR 701.22(b)(5)(iv).
    \16\ 12 CFR 723.4(c).
---------------------------------------------------------------------------

    The Board believes that more input is necessary to determine 
whether a universal limit would be beneficial and should be adopted in 
place of the current product specific limits. As such, the Board asks 
that commenters provide comments addressing: (1) Whether the NCUA 
should provide a single universal standard limit for commercial loans 
and loan participations that may be purchased with respect to a single 
borrower or group of associated borrowers; (2) if so, the appropriate 
limit for such a standard; (3) if not, why not; and (4) any other 
issues stakeholders believe are relevant to this determination. The 
Board also requests that commenters consider FCU Act limitations, 
specifically the general limit on loans to a single borrower of ``10 
per centum of the credit union's unimpaired capital and surplus'' in 
section 107(5)(A)(x), when commenting.\17\
---------------------------------------------------------------------------

    \17\ 12 U.S.C. 1757(5)(A)(x).
---------------------------------------------------------------------------

III. Section-by-Section Analysis

    This proposed rule reduces regulatory burden and makes the NCUA's 
regulations more user-friendly for credit unions. As such, it is 
largely clarifying and technical in nature and would maintain most of 
the current language in Sec.  701.21. The proposed changes to Sec.  
701.21 and the conforming amendments to Sec. Sec.  701.20 and 701.22 
are discussed in more detail below.\18\
---------------------------------------------------------------------------

    \18\ All citations to Sec. Sec.  701.20, 701.21, 701.22, and 
part 723 in this preamble section refer to the NCUA's regulations in 
12 CFR chapter VII.
---------------------------------------------------------------------------

Section 701.20 Suretyship and Guaranty

    The proposal would make minor conforming amendments to Sec.  
701.20(c).
    The proposal would make conforming amendments to the section 
governing requirements for suretyship or guaranty agreements by 
removing outdated cross-citations to the loans to one borrower or group 
of associated borrowers limit in Sec. Sec.  723.2 and 723.8 of the 
member business lending regulation and adding updated cross-citations 
to 701.22(b)(5)(iv) of the NCUA's loan participation regulation and 
723.4(c) of the NCUA's member business lending regulation.

Section 701.21

    The proposal would divide current Sec.  701.21(c)(4) into two new 
subparagraphs. One paragraph, Sec.  701.21(c)(4)(i), would state the 
general rule that loans carry a 15-year maturity. The other, Sec.  
701.21(c)(4)(ii), would make more explicit that there are exceptions to 
the general 15-year maturity limit in Sec.  701.21 (e) through (g) for 
various types of credit union loans.
    The proposal would maintain all of current Sec.  701.21(c)(4) in 
proposed Sec.  701.21(c)(4)(i), which articulates the general 15-year 
maturity limit that exists on FCU loans. However, the proposal also 
would add language to clarify that the maturity for a lending action 
that qualifies as a new loan under GAAP is calculated from the new date 
of origination.
    Section 701.21(c)(4)(ii) of the proposal would explicitly state, in 
three subparagraphs, that three exceptions exist to the general 15-year 
maturity limit and cross-cite to Sec. Sec.  701.21(e)-(g), which detail 
them as follows:
    Paragraph (c)(4)(ii)(A) of the proposal would explicitly cross-cite 
to the exception to the general 15-year maturity limit that exists in 
Sec.  701.21(e) regarding covered loans secured, in full or in part, by 
the insurance or guarantee of, or with an advance commitment to 
purchase the loan, in full or in part, by the Federal Government, a 
State government or any agency of either.
    Paragraph (c)(4)(ii)(B) of the proposal would explicitly cross-cite 
to the exception to the general 15-year maturity limit that exists in 
Sec.  701.21(f) regarding covered home improvement, mobile home, and 
second mortgage loans.
    Paragraph (c)(4)(ii)(C) of the proposal would explicitly cross-cite 
to the exception to the general 15-year maturity limit that exists in 
Sec.  701.21(g) regarding covered 1-4 family real estate loans.
    The proposal would revise Sec.  701.21(c)(5) to add cross-citations 
to the specific requirements that exist on loans to a single borrower 
or group of associated borrowers in the loan participation rule, Sec.  
701.22(b)(5)(iv), and member business lending rule, Sec.  723.4(c).
    The proposal would revise Sec.  701.21(e) to make more explicit 
that the maturity limits applicable to loans covered by paragraph (e) 
are notwithstanding the general 15-year limit in paragraph (c)(4). The 
proposal would also add a cross-citation to paragraph (c)(4).
    The proposal would retain almost all of current Sec.  701.21(f), 
but would insert some additional language to improve clarity.
    The proposal would revise Sec.  701.21(f)(1) to make more explicit 
that the maturity limit applicable to loans covered by paragraph (f) is 
notwithstanding the general 15-year limit in paragraph (c)(4). The 
proposal would also add a cross-citation to paragraph (c)(4).
    The proposal would retain almost all of current Sec.  701.21(g), 
but would insert some additional language to improve clarity.

[[Page 39625]]

    The proposal would revise Sec.  701.21(g)(1) to make more explicit 
that the maturity limit applicable to loans covered by paragraph (g) is 
notwithstanding the general 15-year limit in paragraph (c)(4). The 
proposal would also add a cross-citation to paragraph (c)(4).

Section 701.22

    As described in more detail below, the proposal would make minor 
conforming amendments to Sec.  701.22(b) regarding loan participations.
    The proposal would update the cross-citation in Sec.  701.22(b)(1), 
which provides that for a federally insured credit union to purchase a 
participation interest in a loan, the loan must comply with all 
regulatory requirements to the same extent as if the purchasing 
federally insured credit union had originated the loan. Specifically, 
the cross-reference in Sec.  701.22(b)(1) is outdated and would be 
changed from Sec.  723.8 to Sec.  723.4(c).

IV. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include credit unions with assets less than $100 
million) and publishes its certification and a short, explanatory 
statement in the Federal Register together with the rule. The proposed 
rule reduces regulatory burden through clarifying and technical changes 
and will not have an impact on small credit unions. Accordingly, the 
NCUA certifies that the proposed rule will not have a significant 
economic impact on a substantial number of small credit unions.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates new or amends existing information collection 
requirements.\19\ For purposes of the PRA, an information collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement. The proposed rule does not contain 
information collection requirements that require approval by OMB under 
the PRA.\20\ The proposed rule would only make clarifying and technical 
changes.
---------------------------------------------------------------------------

    \19\ 44 U.S.C. 3507(d); 5 CFR part 1320.
    \20\ 44 U.S.C. chap. 35.
---------------------------------------------------------------------------

C. Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. In 
adherence to fundamental federalism principles, the NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This rulemaking will not 
have a substantial direct effect on the states, on the connection 
between the national government and the states, or on the distribution 
of power and responsibilities among the various levels of government. 
The NCUA has determined that this proposal does not constitute a policy 
that has federalism implications for purposes of the executive order.

D. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this final rule will not affect family 
well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999.\21\
---------------------------------------------------------------------------

    \21\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------

List of Subjects in 12 CFR Part 701

    Credit, Credit unions, Reporting and recordkeeping requirements.

    By the National Credit Union Administration Board on August 2, 
2018.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the NCUA Board proposes to amend 
12 CFR part 701 as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority citation for part 701 continues to read as follows:

    Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. 
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.


Sec.  701.20  [Amended]

0
2. Amend Sec.  701.20(c)(2) by removing the citation ``723.2 and 
723.8'' and adding in its place ``701.22(b)(5)(iv) and 723.4(c)''.
0
3. Amend Sec.  701.21 by revising paragraphs (c)(4) and (5), (e), 
(f)(1) introductory text, and (g)(1) to read as follows:


Sec.  701.21  Loans to members and lines of credit to members.

* * * * *
    (c) * * *
    (4) Maturity--(i) In general. The maturity of a loan to a member 
may not exceed 15 years. Lines of credit are not subject to a statutory 
or regulatory maturity limit. Amortization of line of credit balances 
and the type and amount of security on any line of credit shall be as 
determined by contract between the Federal credit union and the member/
borrower. In the case of a lending action that qualifies as a ``new 
loan'' under GAAP, the new loan's maturity is calculated from the new 
date of origination.
    (ii) Exceptions. Notwithstanding the general 15-year maturity limit 
on loans to members, a federal credit union may make loans with 
maturities:
    (A) As specified in the law, regulations or program under which a 
loan is secured, in full or in part, by the insurance or guarantee of, 
or with an advance commitment to purchase the loan, in full or in part, 
by the Federal Government, a State government or any agency of either, 
as provided in paragraph (e) of this section;
    (B) Of up to 20 years or such longer term as is provided in 
paragraph (f) of this section; and
    (C) Of up to 40 years or such longer term as is provided in 
paragraph (g) of this section.
    (5) Ten percent limit. No loan or line of credit advance may be 
made to any member if such loan or advance would cause that member to 
be indebted to the Federal credit union upon loans and advances made to 
the member in an aggregate amount exceeding 10% of the credit union's 
total unimpaired capital and surplus. In the case of loan 
participations as defined in Sec.  701.22(a) of this part and 
commercial loans as defined in Sec.  723.2 of this chapter, additional 
limitations apply as set forth in Sec.  701.22(b)(5)(iv) of this part 
and Sec.  723.4(c) of this chapter.
* * * * *
    (e) Insured, guaranteed and advance commitment loans. 
Notwithstanding the general 15-year maturity limit on loans to members 
in paragraph (c)(4) of this section, a loan secured, in full or in 
part, by the insurance or guarantee of, or with an advance commitment 
to purchase the loan, in full or in part, by the Federal Government, a 
State government or any agency of either, may be made for the maturity 
and under the terms and

[[Page 39626]]

conditions, including rate of interest, specified in the law, 
regulations or program under which the insurance, guarantee or 
commitment is provided.
    (f) 20-year loans. (1) Notwithstanding the general 15-year maturity 
limit on loans to members in paragraph (c)(4) of this section, a 
federal credit union may make loans with maturities of up to 20 years 
in the case of:
* * * * *
    (g) Long-term mortgage loans--(1) Authority. Notwithstanding the 
general 15-year maturity limit on loans to members in paragraph (c)(4) 
of this section, a federal credit union may make residential real 
estate loans to members, including loans secured by manufactured homes 
permanently affixed to the land, with maturities of up to 40 years, or 
such longer period as may be permitted by the NCUA Board on a case-by-
case basis, subject to the conditions of this paragraph (g).
* * * * *


Sec.  701.22  [Amended]

0
3. Amend Sec.  701.22(b)(1) by removing the citation ``Sec.  723.8'' 
and adding in its place ``Sec.  723.4''.

[FR Doc. 2018-17087 Filed 8-9-18; 8:45 am]
 BILLING CODE 7535-01-P