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NAFCU staff Tuesday met with NCUA’s Office of Examinations and Insurance (E&I) to discuss several topics of note for credit unions. NAFCU Senior Vice President of Government Affairs Greg Mesack, Vice President of Regulatory Affairs Ann Petros, Chief Economist and Vice President of Research Curt Long, and Regulatory Affairs Counsel Dale Baker attended the meeting.

The group discussed interest rate risks (IRR) facing federal credit unions and how the NCUA can help credit unions limit the IRR to their portfolios. Petros earlier this year wrote to the NCUA requesting the agency immediately raise the permissible interest rate ceiling, and specifically encouraged the agency to establish a floating permissible interest rate ceiling equal to a 15 percent spread over the prime rate.

NAFCU and NCUA E&I staff also discussed appraisals, to which the association reiterated its efforts calling on regulators and Congress to streamline and modernize the appraisal process. The association has been a fervent supporter of rooting out and identifying solutions to combat appraisal bias but has requested clarification on how credit unions can further participate in this effort. NAFCU recently wrote to the House Financial Services Committee regarding several housing finance topics, recommending that the FHFA promote efficiency and cost savings methods in the mortgage process, specifically within the appraisal process. 

Of note, the group also discussed loan participations. NAFCU has urged the NCUA to eliminate a requirement that a federally-insured credit union’s (FICU) internal written loan participation policies must establish a limit on the amount of aggregate loan participations that may be purchased by a single borrower, or group of associated borrowers, not to exceed 15 percent of the FICU’s net worth. The association has also asked the agency to eliminate certain aspects of its loan participation regulations, including the general prohibition against credit unions purchasing loan participations they are not “empowered to grant.”

In addition, the group went over how credit unions can benefit from modernizing examinations. NAFCU has been a strong advocate for identifying how the NCUA can modernize and reduce exam burdens for credit unions, recognizing that the agency’s Modern Examination Risk Identification Tool (MERIT) will help streamline examinations while reducing compliance burdens.

NAFCU last year wrote to the NCUA during its 2022-2023 budget consideration process, calling on the agency to continue taking advantage of cost-saving opportunities and apply lessons learned from the pandemic, including the use of virtual examinations, which have shown to be cost-effective and beneficial for credit unions. The association reiterated the cost-saving benefits of examination modernization and the use of hybrid and virtual examination during the NCUA’s mid-session budget review.

NAFCU will continue to engage the NCUA to directly communicate the credit union industry’s feedback on the agency’s regulations.