(Nov. 19, 2021) Shared locations are service facilities for purposes of multiple common bond federal credit unions (FCUs) adding underserved areas to their membership bases, as are those with electronic facilities such as video teller machines, regardless of whether those credit unions have an ownership interest in either of the facilities, under a rule finalized Thursday by the NCUA Board.

However, automated teller machines (ATMs) continue to be excluded from the service facility definition for adding underserved areas, according to the new rule.

The final rule, approved unanimously by the three-member board, will take effect 30 days after publication in the Federal Register.

The rule was proposed nearly a year ago (in December 2020) to modify Part 701, Appendix B, of NCUA’s regulations to include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple-common-bond FCU that participates in a shared branching network. “Reasonable proximity” to those shared facilities by an underserved group is a requirement under federal law for an FCU to add the group to its membership.

The proposal ran into opposition (largely from banking groups, evidenced by 680 form letters out of more than 700 total comment letters received) objecting to the definition of “service facility” to include ATMs. For the final rule, NCUA dropped ATMs from its shared service definition.

It also dropped in the final rule the requirement that FCUs seeking to add underserved groups must have an ownership interest in shared locations and electronic facilities.

The final rule does include, however, continues to mandate that a service facility must offer all three services: ability to take deposits (shares), approve loans and disburse loan proceeds

In other meeting proceedings, the NCUA Board:

Heard an update on its new exam tools (including the (the Modern Examination and Risk Identification Tool, MERIT), noting that there are now 3,383 total MERIT system users, including 547-plus state supervisory authorities (SSAs).
Issued a proposed 2022-2026 strategic plan for a 60-day comment period.
Was told that the National Credit Union Share Insurance Fund (NCUSIF) is expected to reach an equity ratio of 1.28% by year’s end (if the ratio falls below 1.2% — or is projected to do so within six months – the NCUA Board is required to implement a restoration plan – including a premium – to bring the ratio above 1.2% within eight years).

LINKS:

Final Rule, Part 701, Shared Services Facilities

Board Briefing, NCUA’s Modernized Examination Tools

Board Briefing, Share Insurance Fund Quarterly Report.

(Nov. 12, 2021) A final rule on field of membership (FOM) shared facility requirements will be at least one of the items on the Nov. 18 NCUA Board meeting agenda, released this week.

The board will also receive three board briefings from staff – including one on the agency’s modernized examination tools – and consider the agency’s 2022-26 strategic plan

The board meeting is scheduled to begin at 10 a.m. Thursday at NCUA headquarters in Alexandria, Va.; it will be live-streamed via the Internet.

The final rule, as proposed nearly a year ago (in December 2020), would “modernize” requirements related to service facilities for multiple-common-bond federal credit unions (FCUs).

The proposal – which modifies Part 701, Appendix B, of NCUA regulations — would, the agency said, include any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for a multiple-common-bond FCU that participates in a shared branching network.“

According to NCUA, the FCU need not be an owner of the shared branch network for the shared branch or shared ATM to be a service facility. “These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.”

The proposal was issued for comment on a 2-1 vote, with now-Board Chairman Todd Harper dissenting. Harper said he questioned the proposal’s ability, without changes, to increase service to underserved areas.

The shared service proposal is one of two outstanding proposals the board agreed in September to consider in upcoming meetings in November and December. Next month, the board will consider a proposal on mortgage servicing rights, which Harper also opposed.

The future of unanimous approval for both the FOM and mortgage servicing proposals may be a bit brighter, however: Harper said at last month’s NCUA Board meeting that he hoped to be able to support both in the upcoming votes.

Regarding the modernized exam tools: the agency is rolling out new implements for evaluating credit unions. Those include the agency’s Modern Examination & Risk Identification Tool, (MERIT), as well as associated programs: the Data Exchange Application (DEXA), NCUA Connect, and the Admin Portal.

The other two briefing will be a quarterly report on the National Credit Union Share Insurance Fund (NCUSIF) and an update on the agency’s response to the COVID-19 pandemic.

LINK:

Agenda, NCUA Board Nov. 18 meeting

(Dec. 18, 2020) In other action at Thursday’s meeting, the NCUA Board issued one final rule and three proposed regulations – with three of those approved on split votes after Board Member Todd Harper (the lone Democrat appointee on the board) voted in opposition all three times.

The board:

Approved (unanimously), an extension to Dec. 31, 2021 for a temporary final rule that increases the maximum aggregate amount of loan participations that a federally insured credit union (FICU) may purchase from a single originating lender without seeking a waiver from NCUA to the greater of $5 million or 200% of the FICU’s net worth (up from the greater of $500 million or 100% of the FICU’s net worth). The rule had been slated to expire at year’s end. The temporary rule, adopted by the NCUA Board as a relief measure for credit unions in the midst of the coronavirus crisis last spring, took effect April 21.
Issued a proposed rule (on a 2-1 vote) on field of membership shared facility requirements (under Part 701, Appendix B, of agency rules) that NCUA said is intended to modernize requirements related to service facilities for multiple common bond (MCB) federal credit unions (FCUs). NCUA said the proposal includes any shared branch, shared ATM, or shared electronic facility in the definition of “service facility” for an MCB FCU that participates in a shared branching network. “The FCU need not be an owner of the shared branch network for the shared branch or shared ATM to be a service facility,” the agency said. “These changes would apply to the definition of service facility both for additions of select groups to MCB FCUs and for expansions into underserved areas.” Harper said he questioned the proposal’s ability, without changes, to increase service to underserved areas. The proposal will have a 30-day comment period.
Released a second proposed rule (on a 2-1 vote), this one on mortgage servicing rights (under Parts 703 and 721 of agency rules), which would amend the agency’s investment regulation to permit FCUs to purchase mortgage servicing rights from other federally insured credit unions subject to certain conditions. Harper called the proposal “half baked,” but said he could find a way to support a final rule if changes were made. The proposal will be issued with a 30-day comment period.
Advanced yet a third proposed rule – this one on overdraft policy (under Part 701 of NCUA rules) – also on a 2-1 vote. The proposal would remove the requirement that an FCU’s written overdraft policy establish a 45-day time limit for a member to either deposit funds or obtain an approved loan from the FCU to cover each overdraft, and replace it with a requirement that the written policy must establish a specific time limit that is “both reasonable and applicable to all members for a member either to deposit funds or obtain an approved loan from the FCU to cover each overdraft.” In May, the board tabled a proposed interim final rule to let FCUs decide how long members have to resolve account overdrafts. The proposal was tabled after failing to win a second from one of two board members when Chairman Hood asked for it (both members Harper and McWatters expressed opposition to a final rule). Back in May, Harper said the rule would (among other things) allow credit unions to garnish members’ income – including any economic stimulus relief funds – to pay off overdraft debt. Harper reiterated his objections Thursday (“I couldn’t support it then, I can’t now,” he said). Comments are due 30 days after publication in the Federal Register.

The board also set the “normal operating level” for the National Credit Union Share Insurance Fund (NCUSIF) at 1.38 for the coming year, no change from 2020. The NOL represents the target level of reserves in the fund relative to shares insured (referred to as the equity level). Generally, it is the level of reserves the board believes is needed to deal with anticipated losses from credit unions (if any) throughout the year, without lowering the reserving rate below 1.20%, the point at which an insurance premium would be required.

Along those lines, staff told Board Member Harper that it estimates the equity level of the fund at year-end will be 1.32% — well above the level at which a premium would be required. Agreeing with staff that chances of a premium in 2021 now look “next to zero,” Harper said that would be “welcome news to many credit unions.”

LINKS:
Temporary Final Rule, Regulatory Relief in Response to COVID-19

Proposed rule, Field of Membership Shared Facility Requirements

Proposed Rule, Mortgage Servicing Rights

Proposed Rule, Part 701, Overdraft Policy.

Board Briefing, Share Insurance Fund 2021 Normal Operating Level