7 TAC §91.709
The Texas Credit Union Commission adopts amendments to §91.709,
relating to member business loans without changes to the text published in
the August 2, 2002, issue of the
Texas Register
(27
TexReg 6789) and will not be republished. The first request for comments was
published in the March 29, 2002 issue of the
Texas
Register
(27 TexReg 2393).
One of the amendments will limit member business lending to those credit
unions with a net worth ratio of six percent or greater. Another amendment,
for qualifying credit unions, adds certain exceptions to the requirement that
all member business loans be secured by collateral. A third amendment clarifies
the circumstances under which the loan-to-value ratio may exceed eighty percent.
A fourth amendment reduces the equity interest a member borrower must have
in a member business loan for land development and establishes a new equity
interest requirement for construction loans or for a combination of development
and construction loans. Finally, the definition of Net Worth is modified to
conform with NCUA Rules and Regulations (12 CFR, Chapter VII, Part 702).
One comment letter was received from Community Credit Union (CCU). CCU's
urged the Commission to include additional language that would permit a temporary
dip below the minimum net worth ratio for at least two quarters. After carefully
reviewing the comments, the Commission declined to make any changes to subsection
(b), stating that the revised definition of net worth provides sufficient
latitude for credit unions to choose a total asset measure which will minimize
the adverse consequences of unforeseen circumstances such as a sudden influx
of deposit due to economic conditions. Further, the Commission has previously
provided the commissioner in Section 91.701(e) with the authority to grant
waivers of such requirements as the particular situation might warrant. CCU
also recommended that the Commission eliminate the requirement that a credit
union must have at least a seven percent net worth ratio to make member business
loans that are not secured by collateral. The Commission rejected the proposal
to modify subsection (d), stating that in order to mitigate the risk to the
National Credit Union Share Insurance Fund and to be consistent with Federal
Share Insurance statutes and safety and soundness considerations the expanded
authority to make certain unsecured member business loans should only be extended
to well-capitalized credit unions.
The amendments are adopted under the provision of the Texas Finance
Code §124.001, which provides the Credit Union Commission with the authority
to adopt rules governing loans made to credit union members; and under the
Texas Finance Code §15.402, which authorizes the commission to adopt
reasonable rules for administering Title 2, Chapter 15 and Title 3, Subchapter
D of the Texas Finance Code.
The specific section affected by the amendment is Texas Finance Code §124.001.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on February 3, 2003.
TRD-200300806
Harold E. Feeney
Commissioner
Credit Union Department
Effective date: February 23, 2003
Proposal publication date: August 2, 2002
For further information, please call: (512) 837-9236