Chapter DFI-CU 72

DFI-CU 72.06(8) (8) A requirement for the receipt and periodic updating of financial statements and other documentation, including tax returns.

DFI-CU 72.06(9) (9) A requirement for documentation sufficient to support each request to extend credit, or increase an existing loan or line of credit, except where the board of directors finds that the required documentation is not generally available for a particular type of loan and states the reasons for those findings in the credit union’s written policies. The documentation shall include all of the following:

DFI-CU 72.06(9)(a) (a) Balance sheet.

DFI-CU 72.06(9)(b) (b) Cash flow analysis.

DFI-CU 72.06(9)(c) (c) Income statement.

DFI-CU 72.06(9)(d) (d) Tax data.

DFI-CU 72.06(9)(e) (e) Analysis of leveraging.

DFI-CU 72.06(9)(f) (f) Comparison with industry average or similar analysis.

DFI-CU 72.06(10) (10) Collateral requirements, including all of the following:

DFI-CU 72.06(10)(a) (a) Loan-to-value ratios.

DFI-CU 72.06(10)(b) (b) Determination of value.

DFI-CU 72.06(10)(c) (c) Determination of ownership.

DFI-CU 72.06(10)(d) (d) Steps to secure various types of collateral.

DFI-CU 72.06(10)(e) (e) A schedule as to how often the credit union will reevaluate the value and marketability of collateral.

DFI-CU 72.06(11) (11) The interest rates and maturities of the business loans.

DFI-CU 72.06(12) (12) General loan procedures, including all of the following:

DFI-CU 72.06(12)(a) (a) Loan monitoring.

DFI-CU 72.06(12)(b) (b) Servicing and follow-up.

DFI-CU 72.06(12)(c) (c) Collection.

DFI-CU 72.06(13) (13) Identification of those individuals prohibited from receiving member business loans.

DFI-CU 72.06(14) (14) Guidelines for purchase and sale of member business loans and loan participations, if the credit union intends to engage in these activities.

DFI-CU 72.06 Note Note: The Office of Credit Unions recognizes that all of the provisions of the policy may not apply to every loan.

DFI-CU 72.06 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.07 DFI-CU 72.07 Collateral and security requirements. Unless granted a waiver by the director, all of the following shall apply:

DFI-CU 72.07(1) (1) All member business loans shall be secured by collateral in accordance with this section, except for the following:

DFI-CU 72.07(1)(a) (a) A credit card line of credit granted to nonnatural persons that is limited to routine purposes normally made available under such lines of credit.

DFI-CU 72.07(1)(b) (b) A loan made by a credit union where the loan and the credit union meet all of the following:

DFI-CU 72.07(1)(b)1. 1. The amount of the loan or loans to any one individual does not exceed 1% of the credit union’s net worth.

DFI-CU 72.07(1)(b)2. 2. The aggregate of the unsecured business loans under this paragraph does not exceed 10% of the credit union’s net worth.

DFI-CU 72.07(1)(b)3. 3. The credit union has a net worth ratio of at least 7%.

DFI-CU 72.07(1)(b)4. 4. The credit union submits reports to the Office of Credit Unions with its NCUA call reports providing numbers and such other details as may be required by the director to demonstrate compliance with this paragraph.

DFI-CU 72.07(2) (2) For a member business loan secured by collateral on which the credit union will have a first lien, a credit union may grant the loan with an LTV ratio in excess of 80% only where the value in excess of 80% is as follows:

DFI-CU 72.07(2)(a) (a) Covered through acquisition of private mortgage or equivalent type insurance provided by an insurer acceptable to the credit union, and the LTV ratio does not exceed 95%; or

DFI-CU 72.07(2)(b) (b) Insured or guaranteed, or subject to advance commitment to purchase, by an agency of the federal government, state, or any of its political subdivisions, and the LTV ratio does not exceed 95%.

DFI-CU 72.07(3) (3) For a member business loan secured by collateral on which the credit union will have a second or lesser priority lien, the credit union shall not grant the loan with an LTV ratio in excess of 80%.

DFI-CU 72.07(4) (4) For a member business loan secured by the same collateral on which the credit union will have a first lien as well as other lesser priority liens, the credit union may grant the loan with an LTV ratio in excess of 80% only if sub. (2) (a) or (b) is satisfied. In no case shall the LTV ratio exceed 95%.

DFI-CU 72.07(5) (5) For a member business loan secured by the collateral on which the credit union will have lesser priority liens but no first lien, the credit union shall not grant the loan with an LTV ratio in excess of 80%.

DFI-CU 72.07 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.08 DFI-CU 72.08 Amount of loan. Unless the director grants a waiver for a higher amount, the aggregate amount of business loans to a member or associated members shall not exceed 15% of the credit union’s net worth or $100,000.00, whichever is greater.

DFI-CU 72.08 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.09 DFI-CU 72.09 Calculating the aggregate 15% limit. To calculate the aggregate 15% limitation, the credit union shall do the following:

DFI-CU 72.09(1) (1) Calculate the numerator by adding together the amount of the member business loans to a member and associated members, if any. From this amount, the credit union shall subtract each of the following:

DFI-CU 72.09(1)(a) (a) Any portion secured by shares or deposits in the credit union making the extension of credit or in other credit unions, or deposits in other financial institutions.

DFI-CU 72.09(1)(b) (b) Any portion insured or guaranteed by any agency or subdivision of the state or federal government.

DFI-CU 72.09(1)(c) (c) Any portion subject to an advance commitment to purchase by any agency or subdivision of the state or federal government.

DFI-CU 72.09(2) (2) After completing the calculation in sub. (1), divide the numerator by the credit union’s net worth.

DFI-CU 72.09 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.10 DFI-CU 72.10 Available waivers. A credit union may seek a waiver for any of the following:

DFI-CU 72.10(1) (1) Construction and development loan requirements under s. DFI-CU 72.04.

DFI-CU 72.10(2) (2) Loan-to-value ratio requirements under s. DFI-CU 72.07.

DFI-CU 72.10(3) (3) Maximum loan amount to a member and associated members under s. DFI-CU 72.08.

DFI-CU 72.10(4) (4) Appraisal requirements under section 722.3 of NCUA rules.

DFI-CU 72.10 Note Note: A copy of NCUA rules may be obtained by writing to the Office of Credit Unions, P.O. Box 14137, Madison, WI 53714-0137.

DFI-CU 72.10 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.11 DFI-CU 72.11 Obtaining a waiver.

DFI-CU 72.11(1) (1) To obtain a waiver under s. DFI-CU 72.10, a credit union shall submit a request to the director. The request shall contain all of the following:

DFI-CU 72.11(1)(a) (a) A copy of the member business loan policy.

DFI-CU 72.11(1)(b) (b) The higher limit sought, if applicable.

DFI-CU 72.11(1)(c) (c) An explanation of the need to raise the limit, if applicable.

DFI-CU 72.11(1)(d) (d) Documentation supporting the credit union’s ability to manage this activity.

DFI-CU 72.11(1)(e) (e) An analysis of the credit union’s prior experience making member business loans, including each of the following:

DFI-CU 72.11(1)(e)1. 1. The history of loan losses and loan delinquency.

DFI-CU 72.11(1)(e)2. 2. Volume, and cyclical or seasonal patterns.

DFI-CU 72.11(1)(e)3. 3. Diversification.

DFI-CU 72.11(1)(e)4. 4. Concentrations of credit to a member and associated members in excess of 15% of net worth.

DFI-CU 72.11(1)(e)5. 5. Underwriting standards and practices.

DFI-CU 72.11(1)(e)6. 6. Types of loans grouped by purpose and collateral.

DFI-CU 72.11(1)(e)7. 7. The qualifications of personnel responsible for underwriting and administering member business loans.

DFI-CU 72.11(2) (2) Upon receipt of the request for waiver, the director shall do all of the following:

DFI-CU 72.11(2)(a) (a) Review the information provided in the request.

DFI-CU 72.11(2)(b) (b) Evaluate the level of risk to the credit union.

DFI-CU 72.11(2)(c) (c) Consider the credit union’s historical capital, asset, quality, management, earnings and liquidity (“CAMEL”) composite and component ratings.

DFI-CU 72.11(2)(d) (d) Notify the credit union when the waiver request is deemed complete.

DFI-CU 72.11(2)(e) (e) Notify the credit union of the action taken within 45 calendar days of receiving a complete request.

DFI-CU 72.11(3) (3) In connection with a waiver request under s. DFI-CU 72.10 (1) to (3), all of the following shall apply:

DFI-CU 72.11(3)(a) (a) The director shall provide a copy of the waiver request to the applicable regional director of the NCUA, and shall consult and seek to work cooperatively with the applicable regional director in deciding upon the request.

DFI-CU 72.11(3)(b) (b) The waiver shall not be effective until the director approves it.

DFI-CU 72.11(3)(c) (c) If the credit union requesting the waiver does not receive notification within 45 calendar days of the date the complete request was received by the director, the waiver request shall be deemed approved by the director.

DFI-CU 72.11(3)(d) (d) The director shall promptly notify the applicable regional director of NCUA of his or her decision on the request.

DFI-CU 72.11(4) (4) In connection with a waiver request under s. DFI-CU 72.10 (4), all of the following shall apply:

DFI-CU 72.11(4)(a) (a) If the director approves the request, the director shall promptly forward the request to the applicable regional director of the NCUA for decision under 12 CFR 723.12.

DFI-CU 72.11(4)(b) (b) The waiver shall not be effective until the applicable regional director of the NCUA approves it in accordance with 12 CFR 723.12.

DFI-CU 72.11(4)(c) (c) The credit union may appeal the regional director’s decision in accordance with 12 CFR 723.13.

DFI-CU 72.11 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.14 DFI-CU 72.14 Aggregate member business loan limit. The aggregate limit on the amount of a credit union’s member business loans is the lesser of 1.75 times the credit union’s net worth or 12.25% of the credit union’s total assets.

DFI-CU 72.14 History History: CR 02-034: cr. Register August 2002 No. 560, eff. 9-1-02.

DFI-CU 72.15 DFI-CU 72.15 Exceptions to the aggregate business loan limit. Credit unions that meet any one of the following criteria qualify for an exception from the aggregate member business loan limit:

DFI-CU 72.15(1) (1) Credit unions that have a low-income designation.

DFI-CU 72.15(2) (2) Credit unions that participate in the Community Development Financial Institutions program.