Part 6.
CREDIT UNION DEPARTMENT
Chapter 91.
CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS
Subchapter G. LENDING POWERS
7 TAC §91.701
The Credit Union Commission proposes amendments to §91.701,
concerning lending powers. The amendments add language to expand and clarify
underwriting standards, liquidity guidelines and waiver request requirements.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by credit unions
regarding lending powers and requirements. There is no anticipated effect
on small businesses as a result of adopting the amended rule. There is no
economic cost anticipated to credit unions or individuals for complying with
the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001, which authorizes
the Commission to adopt rules regarding loans to members.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.701.Lending Powers.
(a)
Authorization.
A credit union may originate,
invest in, sell, purchase, service, or participate in loans or otherwise extend
credit in accordance with the Act, these Rules, and other applicable law.
(b)
Written Policies.
Each credit union, before
engaging in any lending activity, shall establish written lending policies
approved by its board of directors that establish prudent credit underwriting
and documentation standards for each specific type of lending activity. The
lending policies shall contain a general outline of the manner in which loans
are made, serviced, and collected. In addition the policies must:
(1) - (9)
(No change.)
(c)
Underwriting Standards. To be considered prudent,
a
[
(1) - (3)
(No change.)
(4)
The level of equity invested in the collateral
(loan-to-value
ratio)
;
(5)
The type of information and documentation necessary
to approve new credit, renew credit, increase credit to existing borrowers,
and change terms in previously approved credits
[
(6)
A co-signer or other
[
(7)
(No change.)
(8)
Maximum loan maturities
that relate to the anticipated
source of repayment, the purpose of the loan, and the useful life of any collateral
[
(9)
Loan pricing that reflects the credit union's cost
of funds, overhead, credit risk premium, and a reasonable return
[
(10)
The need for collateral
[
(11)
Filing
[
(d)
Loan Maturity Limit.
Except when a higher maturity
date is provided for elsewhere in this chapter, the maturity of a loan to
a member may not exceed 15 years [
(e)
Liquidity. In addition to establishing
controls for credit risks, credit unions shall establish procedures and guidelines
to monitor and limit the total volume of loans outstanding, to ensure adequate
liquidity. In setting such guidelines, the credit union shall consider various
factors such as credit demand, the volatility of shares and deposits, and
availability of alternative funding sources.
(f)
[
(1)
The requirement to be waived, the higher
limit or the ratio sought;
(2)
An explanation of the need for the waiver
or to raise the limit or ratio; and
(3)
Documentation supporting the credit union's
ability to manage the additional risk from this activity.
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 June 12, 2006.
TRD-200603207
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.704
The Credit Union Commission proposes amendments to §91.704,
concerning real estate lending. The amendments add definitions and clarify
certain provisions pertaining to loan to value limits, excluded transactions
and loans to 100% of value.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding real estate lending requirements. There is no anticipated
effect on small businesses as a result of adopting the amended rule. There
is no economic cost anticipated to credit unions or individuals for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001, which authorizes
the Commission to adopt rules regarding loans to members.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.704.Real Estate Lending.
(a)
Definitions. For the purposes of this
section, the following words and terms shall have the following meanings,
unless the context clearly indicates otherwise.
(1)
First lien means any mortgage that takes priority over
any other lien or encumbrance on the same property and that must be satisfied
before other liens or encumbrances may share in proceeds from the property's
sale.
(2)
Other acceptable collateral means any collateral in which
the credit union has a perfected security interest, that has a quantifiable
value, and is accepted by the credit union in accordance with safe and sound
lending practices.
(3)
Owner-occupied means that the owner of the underlying real
property occupies a dwelling unit of the real property as a principal residence.
(4)
Readily marketable collateral means insured deposits, financial
instruments, and bullion in which the credit union has a perfected interest.
Financial instruments and bullion must be salable under ordinary circumstances
with reasonable promptness at a fair market value determined by quotations
based on actual transactions, on an auction or similarly available daily bid
and ask price market.
(b)
[
(1)
Title insurance;
(2)
Escrow administration;
(3)
Loan payoffs;
(4)
Collection and foreclosure; and
(5)
Servicing and participation agreements.
(c)
[
(1)
The board of directors shall establish their own internal
loan-to-value limits for real estate loans based on type of loan. These internal
limits, however, shall not exceed the following regulatory limits:
(A)
Unimproved land held for investment/speculation--Loan to
value limit 60%
(B)
Construction and Development: commercial,
multifamily, and other nonresidential--Loan to value limit 75%
(C)
[
(D)
[
(E)
First lien: other residential real estate
such as a second or vacation home--Loan to value limit 90%
(F)
[
(G)
[
(2)
In determining the loan
-
to
-
value
ratio
[
(d)
[
(1)
Improved residential real estate loans (owner-occupied
, first lien
)--40 years
(2)
Improved residential real estate loans (not
owner-
[
(3)
Interim construction loans--18 months
(4)
Manufactured home (first lien)--20 years
(5)
Home equity loans--20 years (second lien)--30 years (first
lien)
(6)
Home improvement loans--20 years
(7)
All other loans--15 years
(e)
[
(1)
Loans that
are covered through appropriate credit
enhancements in the form of readily marketable collateral or other acceptable
collateral
[
(2)
Loans guaranteed or insured by the U.S. government or its
agencies, provided that the amount of the guaranty or insurance is at least
equal to the portion of the loan that exceeds the regulatory loan-to-value
limit.
(3)
Loans guaranteed, insured or otherwise backed by the full
faith and credit of the state, a municipality, a county government, or an
agency thereof, provided that the amount of the guaranty, insurance, or assurance
is at least equal to the portion of the loan that exceeds the regulatory loan-to-value
limit.
[(4)
Loans guaranteed or insured by a private
corporation, organization or other entity provided that the amount of guaranty
or insurance is at least equal to the portion of the loan that exceeds the
regulatory loan-to-value limit, and provided that the credit union has determined
that the guarantor or insurer has the financial capacity and willingness to
perform under the terms of the guaranty or insurance agreement.]
(4)
[
(5)
[
(6)
Loans that facilitate the sale of real
estate acquired by the credit union in the ordinary course of collecting a
debt previously contracted in good faith.
(f)
[
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 June 12, 2006.
TRD-200603208
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.708
The Credit Union Commission proposes amendments to §91.708,
concerning real estate appraisals. The amendments clarify that the credit
union must maintain policies and procedures for maintaining independent appraisals,
and expand on appropriate evaluation of real property collateral for loans
less than $250,000. In addition, the amendments add a section alerting credit
unions that they may have to also comply with Part 722 of the National Credit
Union Administration's Rules and Regulations if it is applicable.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding real estate appraisal requirements. There is no anticipated
effect on small businesses as a result of adopting the amended rule. There
is no economic cost anticipated to credit unions or individuals for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001, which authorizes
the Commission to adopt rules regarding loans to members.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.708.Real Estate Appraisals or Evaluations .
(a)
Policies and Procedures. A credit union's
board of directors is responsible for reviewing and adopting policies and
procedures that establish and maintain an effective, independent real estate
appraisal and evaluation program. A credit union's selection criteria for
individuals who may perform appraisals or evaluations must provide for the
independence of the individual performing the evaluation. That is, the individual
has neither a direct nor indirect interest, financial or otherwise, in the
property or transaction. The individual selected must also be competent to
perform the assignment based upon the individual's qualifications, experience,
and educational background. An individual may be an employee of a credit union
if the individual qualifies under the conditions and requirements contained
in Part 722 of the National Credit Union Administration Rules and Regulations.
(b)
[
(c)
[
(d)
[
(e)
[
(f)
As applicable, a credit union shall also
comply with the real estate appraisal requirements contained within Part 722
of the National Credit Union Administration Rules and Regulations.
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 June 12, 2006.
TRD-200603212
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.710
The Credit Union Commission proposes amendments to §91.710,
concerning overdraft protection. The amendments clarify that the credit union
must manage the risk associated with overdraft protection programs and ensure
that marketing materials and other communications with members regarding the
program are not misleading or encourage irresponsible member financial behavior.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions and the public regarding overdraft program requirements. There is no
anticipated effect on small businesses as a result of adopting the amended
rule. There is no economic cost anticipated to credit unions or individuals
for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §123.105, which authorizes
credit unions to collect fees.
The specific section affected by the proposed amendments is Texas Finance
Code, §123.105.
§91.710.Overdraft Protection.
(a)
Written policy.
A credit union may
advance money to a member to cover an account deficit without having a credit
application from the borrower on file if the credit union has [
(1)
Set
[
(2)
Establish
[
(3)
Limit
[
(4)
Institute prudent practices related to
suspension of overdraft protection services; and
(5)
Establish
[
(b)
Safety and Soundness Requirements.
A credit union must manage the risks associated with an overdraft protection
program in accordance with safe and sound credit union principles. Accordingly,
a credit union must establish and maintain effective risk management and control
processes over its program. Such processes include appropriate recognition,
treatment, and financial reporting, in accordance with generally accepted
accounting principles, of income, expenses, assets, liabilities, and all expected
and unexpected losses associated with the program. A credit union also shall
assess the adequacy of its internal control and risk mitigation activities
in view of the nature and scope of its overdraft protection program.
(c)
Communications with Member. A credit union
shall carefully review its overdraft protection program to ensure that marketing
and other communications concerning the program do not mislead members to
believe that the program is a traditional line of credit or that payment of
overdrafts is guaranteed. In addition, a credit union shall take reasonable
precautions to make sure members are not misled about the correct amount of
their account balance, or the costs or scope of the overdraft protection offered,
and that it does not encourage irresponsible member financial behavior that
potentially may increase risk to the credit union.
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 June 12, 2006.
TRD-200603215
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.711
The Credit Union Commission proposes amendments to §91.711,
concerning loan participations. The amendments more clearly outline loan participation
policy requirements and add a provision requiring the credit union to monitor
any third party servicer's performance.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding loan participation requirements. There is no anticipated
effect on small businesses as a result of adopting the amended rule. There
is no economic cost anticipated to credit unions or individuals for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.351, which authorizes
credit unions to invest in participation loans.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.351.
§91.711.Loan Participations.
(a)
A credit union may
purchase loan participations
[
(1)
Establish the standards for review;
(2)
Set up the aggregate limits on the amount
of loans participations purchased from any single outside source; and
(3)
Require that all participations meet the
underwriting, documentation, and compliance standards applied to loans of
that type originated by the credit union. The credit union may also rely on
the stated written underwriting standards of the originating lender, provided
it performs a due diligence review of the loan(s) that, at a minimum, confirms
compliance with this subsection.
(b)
For regulatory purposes, a
[
(c)
A credit union may sell to or purchase from any participant
the servicing of any loan in which it owns a participation interest.
If a party other than the credit union will be servicing the loan(s), the
credit union shall ensure that all contracts require the servicer to administer
the loan(s) in accordance with prudent industry standards, and provide for
a possible change of the servicer if performance is inadequate.
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 June 12, 2006.
TRD-200603214
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.712
The Credit Union Commission proposes amendments to §91.712,
concerning plastic cards. The amendments clarify annual program review requirements
for plastic cards.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding plastic card program review requirements. There is no anticipated
effect on small businesses as a result of adopting the amended rule. There
is no economic cost anticipated to credit unions or individuals for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001 which authorizes
the Commission to adopt rules for loans to members and §124.051, which
authorizes open-end credit plans for credit unions.
The specific sections affected by the proposed amendments are Texas Finance
Code, §124.001 and §124.051.
§91.712.Plastic Cards.
(a)
(No change.)
(b)
Credit cards.
A credit union may issue credit
cards in accordance with the credit union's written policies, which shall
include at a minimum:
(1) - (3)
(No change.)
(c)
Program Review.
(1)
A credit union shall review, on at least an annual basis,
its plastic card program with particular emphasis on:
(A)
The amount of losses
[
(B)
The loss
[
(C)
The availability and
possible implementation
[
(D)
A cost benefit analysis of supplemental
insurance coverage for theft and fraud related losses.
(2)
The review shall be documented in writing, with any
approved
changes to the plastic card program being entered into the
minutes of the board meeting.
[(3)
At least annually, the credit union's
board shall also cause to be performed an assessment of earnings and the capital
position to ensure that the credit union can absorb potential related plastic
card program losses. This review shall include a cost benefit analysis of
supplemental insurance coverage for theft and fraud related losses. Establishment
of a segregated contingency reserve may be utilized to further mitigate the
credit union's risk exposure for losses resulting from its plastic card program.]
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 June 12, 2006.
TRD-200603216
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.713
The Credit Union Commission proposes amendments to §91.713,
concerning indirect financing of motor vehicles or other chattels. The amendments
define indirect financing and add requirements relating to written policies,
third party providers and subprime indirect lending programs.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding indirect financing program requirements. There is no anticipated
effect on small businesses as a result of adopting the amended rule. There
is no economic cost anticipated to credit unions or individuals for complying
with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001, which authorizes
the Commission to adopt rules regarding loans to members.
The specific section affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.713.Indirect Financing of Motor Vehicles or Other Chattels.
(a)
Indirect Financing Program.
Credit unions may
implement a program of indirect financing of motor vehicles and other
tangible personal property
[
(b)
Contracts Treated as a Loan.
For
the purposes of this chapter, a retail installment contract purchased under
this authority may be treated as a loan on the books and records of the credit
union and is subject to the same limitations and restrictions imposed upon
loan transactions. As with other lending, the credit union is responsible
for making the final underwriting decision. The seller may initially determine
whether the prospective buyer is a member or eligible for membership in the
credit union, but the final determination of membership eligibility is the
responsibility of the credit union.
(c)
[
(d)
[
(e)
Third Party Providers. A credit union
may rely on services provided by third parties to support its indirect lending
activities. The board of directors must ensure that the credit union exercises
appropriate due diligence before entering into third party arrangements, and
maintains effective oversight and control throughout the arrangement.
(f)
Subprime Indirect Lending. If a credit
union conducts a program that includes subprime indirect lending, it must
perform comprehensive due diligence before engaging in and during that type
of activity. At a minimum, due diligence shall focus on understanding the
higher levels of credit, compliance, reputation, and other risks involved,
plus the likelihood that origination, servicing, collections, operating, and
capital costs will increase. The strategic decision to engage in subprime
indirect lending must also be supported by a sound business plan that establishes
measurable financial objectives as well as limitations on growth, volume,
and concentrations. For the purposes of this section, "subprime indirect lending"
refers to programs that target borrowers with weakened credit histories typically
characterized by payment delinquencies, previous charge-offs, judgments, or
bankruptcies. Such programs may also target borrowers with questionable repayment
capacity evidenced by low credit scores or high debt-burden ratios.
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 June 12, 2006.
TRD-200603217
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.714
The Credit Union Commission proposes amendments to §91.714,
concerning leasing. The amendments add requirements relating to written policies,
insurance and holding period.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be less confusion by the credit
unions regarding leasing program requirements. There is no anticipated effect
on small businesses as a result of adopting the amended rule. There is no
economic cost anticipated to credit unions or individuals for complying with
the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.351, which authorizes
the Commission to adopt rules regarding permitted investments.
The specific sections affected by the proposed amendments is Texas Finance
Code, §124.351.
§91.714.Leasing.
(a) - (d)
(No change.)
(e)
Leasing Salvage Powers. If a credit union believes that
there has been an unanticipated change in conditions that threatens its financial
position by significantly increasing its exposure to loss, it may:
(1) - (2)
(No change.)
(3)
Include any provision in a lease, or make any additional
agreements, to protect its financial position or investment in the circumstances
set forth
in paragraphs (1) and (2) of this subsection
[
(f)
Written Policies. A credit union engaged
in lease underwriting must adopt written policies and develop procedures that
reflect lease practices that control risk and comply with applicable laws.
Any leasing activity must be consistent with the lending policies and underwriting
requirements in §91.701 of this title (relating to Lending Powers). Any
credit union engaged in making or buying leases also must adopt written polices
and procedures that address the additional risks associated with leasing.
(g)
Insurance Requirements. A credit union
must maintain a contingent liability insurance policy with an endorsement
for leasing or be named as the co-insured if the credit union does not own
the leased property. Contingent liability insurance protects the credit union
if it is sued as the owner of the leased property. A credit union must use
an insurance company with a nationally recognized industry rating of at least
a B+. Credit union members must still carry the normal liability and property
insurance on the leased property and the credit union must be named as an
additional insured on the liability insurance policy and as the loss payee
on the property insurance policy.
(h)
Holding Period. At the expiration of the
lease (including any renewals or extensions with the same lessee), or in the
event of a default on a lease agreement prior to the expiration of the lease
term, a credit union shall either liquidate the off-lease property or re-lease
it under a conforming lease as soon as practicable. The credit union must
value off-lease property at the lower of current fair market value or book
value promptly after the property becomes off-lease property.
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 June 13, 2006.
TRD-200603228
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
7 TAC §91.715
The Credit Union Commission proposes amendments to §91.715,
concerning exceptions to the general lending policies. The amendments require
that credit unions identify exceptions to loan policies, report them at least
annually to their board and set an aggregate limit.
The amendments to the rule are proposed as a result of the Department's
general rule review.
Kerri T. Galvin, General Counsel, 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
proposed amendments.
Ms. Galvin has also determined that for each year of the first five years
the proposed amendments are in effect, the public benefits anticipated as
a result of enforcing the amended rule will be greater disclosure and increased
safety and soundness by credit unions when making exceptions to their loan
policies. There is no anticipated effect on small businesses as a result of
adopting the amended rule. There is no economic cost anticipated to credit
unions or individuals for complying with the amendments if adopted.
Written comments on the proposal must be submitted within 30 days after
its publication in the
Texas Register
to Kerri
T. Galvin, General Counsel, Credit Union Department, 914 East Anderson Lane,
Austin, Texas 78752-1699. Oral comments on the proposal can be made at the
Commission's Legislative Advisory Committee meeting on Friday, September 15,
2006 at 9:00 a.m. at 914 East Anderson Lane, Austin, Texas 78752.
The amendments are proposed under the provision of 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 and under Texas Finance Code §124.001, which authorizes
the Commission to adopt rules regarding loans to members.
The specific sections affected by the proposed amendments is Texas Finance
Code, §124.001.
§91.715.Exceptions to the General Lending Policies.
(a) - (b)
(No change.)
(c)
Exception loans shall be identified in
the credit union's records and their aggregate amount reported at least annually
to the board of directors. The aggregate amount of all such loans shall not
exceed 10 percent of the credit union's net worth.
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 June 13, 2006.
TRD-200603224
Harold E. Feeney
Commissioner
Credit Union Department
Earliest possible date of adoption: July 30, 2006
For further information, please call: (512) 837-9236
A
] credit
union's underwriting standards should reflect
consideration of all credit evaluation factors relevant to the type of loan,
including
[
union shall address specific lending procedures for
determining and documenting the following, as applicable
]:
Loan-to-collateral
value limits
];
Any
] secondary
source
[
sources
] of repayment;
for each type of lending
];
Repayment terms and conditions
];
Collateral
]
protection insurance; and
Lien filing
]/recordation
standards to ensure a valid lien
.
unless the purpose of the loan is to
finance the purchase of a manufactured home and the loan is secured by a first
lien, in which case the maturity may not exceed 20 years
]. Open-end
credit is not subject to a regulatory maturity limit. However, the amortization
scheduling on a line of credit balance shall not exceed 15 years[
, unless
it is a home equity line of credit, in which case, the amortization scheduling
on the balance shall not exceed 20 years
].
(e)
]
Waivers.
The commissioner
in the exercise of discretion may grant a waiver in writing of any [
of the
] lending
requirement
[
requirements
] described
in this chapter. A decision to deny a [
requested
] waiver, however,
is not
subject to appeal. A wavier request must contain the following:
[
appealable.
]
(a)
]
Written Procedures.
A
credit union, before engaging in any real estate lending activity, shall establish,
in addition to the
general
requirements of §91.701[
(c)
] of this title (relating to Lending Powers), loan administration procedures
that address the following, as applicable:
(b)
] Loan to Value Limitations.
(B)
] Interim Construction
:
owner-occupied residential real estate
--Loan to value limit 90%
(C)
]
First lien: owner
[
Owner
]-occupied
residential real estate
(other than home
equity)--Loan to value limit 95%
(D)
] Home equity--Loan to value
limit 80%
(E)
]
All
Other--Loan
to value limit 80%
limit
], a credit union shall include
the total
amount of outstanding debt secured by and other liens on
[
all loans
secured by
] the
real
[
same
] property
securing
or being improved by the loan
[
and the recourse obligation of any
such loan sold with recourse
].
(c)
]
Maximum Maturities.
Notwithstanding
the general 15-year maturity limit on lending transactions to members, the
board of directors shall establish in written policy internal maximum maturities
for real estate lending transactions. These maturities should not exceed the
following regulatory limits:
to be
] occupied
, first lien
[
by owner
])--30
years
(d)
]
Excluded Transactions.
It is recognized that there are a number of lending situations in which other
factors significantly outweigh the need to apply the regulatory loan-to-value
limits. These include
[
Exceptions to subsections (b) and (c) of
this section are permitted for the following
]:
subsequently become compliant with loan-to-value ratio
limits due to reduction in principal amount, elimination of senior liens,
or contribution of additional collateral or equity (e.g. improvements to the
real property securing the loan)
].
(5)
] Loans that are to be sold promptly
after origination, without recourse, to a financially responsible third party.
(6)
] Loans that are renewed, refinanced,
or restructured without the advancement of new funds or an increase in the
line of credit (except for reasonable closing costs) where consistent with
safe and sound credit union practices and part of a clearly defined and well-documented
program to achieve orderly liquidation of the debt, reduce risk of loss, or
maximize recovery on the loan.
(e)
]
Loans to 100% of Value.
A credit union may make a loan in an amount up to 100% of the value of real
property security if that part of the loan that exceeds the regulatory loan-to-value
limit is guaranteed or insured by a private corporation, organization or other
entity.
[
Exception loans granted in compliance with subsection
(d) of this section shall be identified in the credit union's records and
reported to the board of directors
].
The board of directors must
ensure that the credit union exercises appropriate due diligence to ensure
that any such guarantor or insurer has the financial capacity and willingness
to perform under the terms of the guaranty or insurance agreement.
(a)
]
Loans Over $250,000.
For
real estate loans in which the transaction value exceeds $250,000, the credit
union shall obtain a professional appraisal report by a state certified or
licensed appraiser. The appraisal report shall be in writing and conform to
generally accepted appraisal standards as evidenced by the Uniform Standards
of Professional Appraisal Practice promulgated by the Appraisal Standards
Board of the Appraisal Foundation, in Washington, D.C.
(b)
]
Loans $250,000 or Less.
For a real
[
Real
] estate loans with a transaction value of
[
less than
] $250,000
or less, the services of a state certified
or licensed appraiser is not necessary; however, the credit union must obtain
an appropriate evaluation of real property collateral
shall be supported
by a written estimate of market value either performed by a qualified individual
who has
demonstrated competency in performing evaluations
[
no direct interest in the property
] or from tax appraisal data of a
governmental entity.
(c)
] Reappraisals may be required
by the commissioner on real estate or other property or interests therein
securing loans, at the expense of the credit union, when the commissioner
has reasonable cause to believe the value of the security is overstated.
(d)
] In the case of renewal of a
loan where additional funds are advanced by the credit union, a written certification
of current value by the original appraiser or an acceptable substitute shall
satisfy this section.
a
]
written
policies and procedures adequate to address the credit, operational,
and other risks associated with this type of program
[
overdraft
policy
]. The policy must:
set
] a cap on the
total dollar amount of all overdrafts the credit union will honor consistent
with the credit union's ability to absorb losses;
establish
]
a time limit
no later than 60
[
not to exceed 45
] calendar
days
from the date first overdrawn
for a member to
repay the
overdraft balance, or obtain an approved loan from the credit union, otherwise
the overdraft balance should be charged off
[
either deposit funds
or obtain an approved loan from the credit union to cover each overdraft
];
limit
] the dollar
amount of overdrafts the credit union will honor per
account
[
member
]; [
and
]
establish
]
the fee, if any, the credit union will charge members for honoring overdrafts.
participate
] in
any type of loan it is authorized to make from
[
loans jointly with
] other credit unions, credit union organizations,
corporations or other financial organizations pursuant to written policies
established by the board of directors.
Such policies shall:
[
Before the disbursement of proceeds to the originating lender, each credit
union shall perform its own due diligence of the loan(s).
]
A participating
] credit union shall
segregate and
treat
the purchase
of a loan
[
a
] participation as an investment
in accordance
with §91.805 of this title (relating to Loan Participation Investments)
, unless the participation is in a loan of a type that the credit union
is authorized to make and the borrower is a member of the credit union or
a member of another participating credit union.
Losses
] caused
by theft and fraud;
Loss
] prevention measures
(
and their adequacy
) currently employed by the credit union
;
[
and
]
use
] of
other
[
appropriate
] loss prevention measures
such as
[
including
] card activation, card security codes,
neural networks, and other evolving technology
; and
[
.
]
chattels
].
As used in this
chapter, an indirect financing is the purchase by a credit union of a retail
installment contract of a member that is originated by a seller to finance
the purchase of the motor vehicle or other property.
(b)
]
Authorization.
Credit
unions may purchase or otherwise hold retail installment contracts when authorized
by applicable law. The retail installment contract must provide for a rate
or amount of time price differential that does not exceed a rate or amount
authorized by applicable law.
(c)
]
Written Policies.
The
board of directors shall establish, implement, and maintain prudent and reasonable
written policies that
are appropriate for the size and complexity of
the credit union's indirect lending program. The board must also ensure that
the credit union has sufficient staff with the expertise to purchase, service,
and monitor the program and the contract portfolio
[
specify guidelines
and criteria to be used in purchasing contracts
] consistent with safe
and sound credit union practices.
The policies must be specific and detailed
enough to foster prudent and compliant credit practices.
subsections
(e)(1) and (e)(2) of this section
].