7 TAC §91.709
The Texas Credit Union Commission proposes amendments to §91.709
concerning certain loans or extensions of credit that a credit union may make,
the proceeds of which will be used for a commercial, corporate, business investment
property or venture, or agricultural purposes (member business loans). The
amendments are being proposed to reduce confusion and to make it abundantly
clear that member business loans must be secured by collateral.
Harold Feeney, Commissioner, has determined that for the first five-year
period the amended rule is in effect, there will be no fiscal implications
for state or local government as a result of enforcing or administering the
rule.
Mr. Feeney has determined that for each year of the first five years the
rule is in effect, the public benefit anticipated will be that the rule will
be unambiguous, therefore preventing future confusion on the part of those
referencing the Commission's rules. There will be no effect on small businesses
as a result of amending this section. There is no anticipated economic cost
to entities that are currently required to comply with these sections as result
of the proposed amendment's adoption.
Written comments on the proposed amendment must be submitted within 30
days after its publication in the
Texas Register
to Harold Feeney, Commissioner, Credit Union Department, 914 East
Anderson Lane, Austin, Texas 78752-1699.
The amendment is proposed 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 proposed amendment is Texas Finance
Code §124.001.
§91.709.Member Business Loans.
(a)
(No change.)
(b)
Member business loans shall be secured
by collateral. The maximum loan-to-value ratio for a loan made under this
section may not exceed 80%.
(c)
[
(b)
] A credit union that engages
in this type of lending shall adopt specific member business loan policies
and review them at least annually. The policies, at a minimum, shall address
all of the following areas:
(1)
Types of business loans to be made.
(2)
The maximum amount of credit union assets, relative to
credit union net worth, that will be invested in member business loans.
(3)
The maximum amount of credit union assets, relative to
credit union net worth, that will be invested in a given category or type
of member business loan.
(4)
The maximum amount of credit union assets, relative to
credit union net worth, that will be loaned to any one member or group of
associated members, subject to subsection (d) of this section.
(5)
The qualifications and experience requirements for personnel
involved in making and servicing business loans.
(6)
Analysis of the member's initial and ongoing financial
capacity to repay the debt.
(7)
Documentation supporting each request for an extension
of credit or an increase in an existing loan or line of credit, which shall
address all of the following:
(A)
A balance sheet;
(B)
An income statement;
(C)
A cash flow analysis;
(D)
Tax returns;
(E)
Leveraging; and
(F)
Receipt and the periodic updating of financial statements,
tax returns, and other documentation.
(8)
Collateral requirements which include all of the following:
(A)
Types of collateral that will be accepted
as security;
(B)
[
(A)
]Loan-to-value (LTV) ratios (which
for all liens cannot exceed 80% unless the value in excess of 80% is covered
through private mortgage or equivalent insurance but in no case can it exceed
95%);
(C)
[
(B)
]Appraisal, title search, and
insurance requirements; and
(D)
[
(C)
]Steps to ensure that a valid
and enforceable lien will be created for each type of collateral accepted
by the credit union.
(9)
Identification, by position, of the officials and senior
management employees who are prohibited from receiving member business loans
which, at a minimum, shall include the credit union's chief executive officer,
any assistant chief executive officers, the chief financial officer, and any
associated member or immediate family member of such persons.
(d)
[
(c)
] The aggregate amount of outstanding
member business loans to any one member or group of associated members shall
not be more than 15% of the credit union's net worth (less the Allowance for
Loan Losses account) or $100,000.00, whichever is higher. If any portion of
a member business loan is secured by shares in the credit union or deposits
in another financial institution, or is fully or partially insured or guaranteed
by, or subject to an advance commitment to purchase by, any agency of the
Federal government or of a state or any of its political subdivisions, such
portion shall not be calculated in determining the 15% limit.
(e)
[
(d)
] Construction and development
of commercial or residential property are subject to the following additional
requirements:
(1)
The aggregate of all construction and development loans
must not exceed 15% of the credit union's net worth. To determine the aggregate,
a credit union may exclude any portion of a loan:
(A)
Secured by shares in the credit union;
(B)
Secured by deposits in another financial institution;
(C)
Fully or partially insured or guaranteed by any agency
of the federal government, state, or its political subdivisions; or
(D)
Subject to an advance commitment to purchase by an agency
of the federal government, state, or its political subdivisions;
(2)
The member borrower must have a minimum of 35% equity interest
in the project being financed; and
(3)
The funds may be released only after on-site, written inspections
by qualified personnel and according to a preapproved draw schedule and any
other conditions as set forth in the loan documentation.
(f)
[
(e)
] The aggregate limit on a credit
union's outstanding member business loans (including any unfunded commitments)
is the lesser of 1.75 times the credit union's net worth or 12.25% of the
credit union's total assets. Loans that are exempt from the definition of
member business loans are not counted for the purpose of the aggregate loan
limit.
(g)
[
(f)
] For the purposes of this section,
the following words and terms, when used in this section, shall have the following
meanings, unless the context clearly indicates otherwise.
(1)
Associated member -- means any member with a common ownership,
investment, or other pecuniary interest in the business or agricultural endeavor
for which the business loan is being made.
(2)
Net Worth -- means retained earnings as defined under Generally
Accepted Accounting Principles.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on March 18, 2002.
TRD-200201691
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 28, 2002
For further information, please call: (512) 837-9236
Subchapter H. INVESTMENTS
7 TAC §91.802
The Texas Credit Union Commission proposes amendments to §91.802
relating to other investments for credit unions.
The amendments modifies the definition of "yankee dollar deposit" to prohibit
investment in U.S. branches of foreign banks, the deposits of which are not
insured by the Federal Deposit Insurance Corporation (FDIC).
The amendments to the rule are proposed as a result of an interested person
petitioning the Commission to amend the rule to prevent the current definition
from being construed to allow investment in non-insured branches.
Harold Feeney, Commissioner, has determined that there will be no fiscal
implications for state or local government as a result of enforcing or administering
the proposed amended rule.
Mr. Feeney has also determined that for each year of the first five years
the proposed amended rule is in effect, the public benefits anticipated as
a result of enforcing the rule will be greater clarification as to credit
unions' ability to invest excess funds not used for loans, as well as improved
safety and soundness given the additional restriction relating to investment
quality. There is no anticipated effect on small businesses as a result of
adopting the proposal. There is no economic cost anticipated to entities that
are required to comply with the amendment as a result of its future adoption.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Harold
Feeney, Commissioner, Credit Union Department, 914 East Anderson Lane, Austin,
Texas 78752-1699.
The amendments are proposed under the provisions of §124.351
of the Texas Finance Code that are interpreted to authorize the Credit Union
Commission to adopt rules authorizing other investments permissible for credit
unions that are responsive to changes in economic conditions or competitive
practices and to the need for safety and soundness of credit union investments.
The specific section affected by this proposed amendments is Texas Finance
Code §124.351.
§91.802.Other Investments
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1) - (11)
(No change.)
(12)
Yankee Dollar deposit--A deposit in a United States branch
of a foreign bank
, the deposits of which are insured by the Federal Deposit
Insurance Corporation, that is
licensed to do business in the state
in which it is located, or a deposit in a state chartered, foreign controlled
bank.
(13) - (15)
(No change.)
(b) - (e)
(No change.)
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on March 18, 2002.
TRD-200201697
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: April 28, 2002
For further information, please call: (512) 837-9236