Summary: Temporary Final Rule Loan Participations

NCUA Temporary Final Rule

Parts 722 & 741.203                   

Loan Participations

FCU Eligible Obligations

FCU Occupancy


Prepared by NASCUS Legislative & Regulatory Affairs Department

April 2020

 NCUA has published a Temporary Final Rule (TFR) making changes to NCUA’s loan participation rule for all federally insured credit unions (FICUs), federal credit union (FCU) eligible obligation rules, and FCU occupancy rules. NCUA is enacting these changes on a temporary basis to help FICUs remain liquid and otherwise operational during the COVID-19 crisis. Specifically, NCUA is making the following temporary changes, effective thru December 31, 2020:

  • raising the maximum aggregate amount of loan participations that a FICU may purchase from a single originating lender to the greater of $5 million or 200% of the FICU’s net worth (applies to federally insured state credit unions “FISCUs” by reference in § 741.203(b))
  • suspending limitations on the eligible obligations that a FCU may purchase and hold
  • tolling the FCU requirement to occupy credit union owned properties not being used for FCU business

The Temporary Final Rule proposed rule may be read here. There is NO COMMENT Period. The TFR is effective from April 21, 2020 through December 31, 2020.


  • Increased aggregated loan participation purchase threshold

Part 701.22(b)(5)(ii) (applied to FISCUs by reference in § 741.204) of NCUA’s rules limits the aggregate amount of loan participations that a FICU may purchase from any one originating lender to the greater of $5 million or 100% of the FICU’s net worth. NCUA promulgated the limitation to mitigate a FICU’s concentration risk. FISCUs could seek a waiver from the limitation from the NCUA RD and the state regulator.

In order to facilitate FICUs’ ability to manage the COVID-19 crisis, maintain operations, and maintain liquidity, NCUA believes it prudent to temporarily raise the cap. Under the temporary final rule, the aggregate limit below which a waiver is not required will be raised to the greater of $5 million or 200% of the FICU’s net worth.

After December 31, 2020, a FICU must return into compliance with the current limitation of the greater of $5 million or 100% of net worth by ceasing to purchase loan participations from the originating lender or requesting a waiver pursuant to the rule.

Regulatory relief for FCUs Only

 The following 2 changes made by NCUA only apply to FCUs.

  • Purchase, Sale, and Pledge of FCU Eligible Obligations

Part 701.23(b) of NCUA’s rules govern an FCU’s ability to purchase, sell, or pledge all or part of an eligible obligation of its members. The rule provides that an FCU may purchase an eligible obligation from any source, provided the FCU is empowered to grant the loan or the loan is refinanced within 60 days following its purchase so that it is a loan the FCU is empowered to grant. FCUs with a composite CAMEL rating of “1” or “2” can purchase eligible obligation from any FICU without regard to the member nexus. NCUA is now expanding that exception to include composite CAMEL “3” FICUs.

  • FCU Occupancy and Disposal of Acquired Premises

Part § 701.36(c) of the rules generally limits an FCU’s investments in fixed assets authorizes and provides that if an FCU acquires premises, including unimproved land or unimproved real property, it must partially occupy them ‘‘no later than six years after the date of acquisition. NCUA is temporarily tolling the regulatory mandated timeframes for an FCU to occupy premises. Any days that fall within the period commencing on April 21, 2020 and concluding at the close of December 31, 2020, shall not be counted for purposes of determining an FCU’s compliance with the regulatory time periods.