Bill would lift loan term limits
NAFCU and CUNA on Tuesday called for passage of a bipartisan bill tabled in the House that once again attempts to increase loan term limits and exclude more loans from the business loan limit members.
The bill introduced by Brian Fitzpatrick (R-Pa.) And Vicente Gonzalez (D-Texas) would remove language that limits most credit union loans to terms of 15 years or less, and allow the NCUA to set limits at its discretion. First mortgages for primary residences are already excluded from these limits, but credit unions want to be able to offer longer term 20-30 year loans for second homes and business loans, either as a first or second lien. .
Businesses looking for these longer term loans for lower monthly payments were left out of credit unions and forced to go to banks.
“Allowing credit unions to provide loans with term limits of more than 15 years will help them provide more opportunities for members, including in the area of student loans,” said the president and CEO from CUNA, Jim Nussle.
“The current maturity limit is a barrier preventing credit unions from providing additional affordable credit, and we thank Representatives Gonzalez and Fitzpatrick for their bipartisan work to resolve this issue,” Nussle said.
Credit unions have also attempted to relax the limits on commercial loans imposed by the ceilings on loans to member companies.
Of 5,175 credit unions reporting in March, 1,653 credit unions had $ 96.3 million in loans to member businesses, or 9.9% of their total loans. The legal limit is 12.25%.
Credit unions are already able to exclude loans under $ 50,000 from their limits under a de minimis provision. The new bill would increase the exemption for loans under $ 100,000.
NAFCU President / CEO Dan Berger said the bill would provide credit unions with increased flexibility to encourage the growth and success of small businesses.
“Credit unions have long sought to provide essential loans to small businesses – many of which are minority or underserved – but have been constrained by the archaic 15-year loan maturity limit and outdated definitions of loans to member companies, ”said Berger.
The bill also contains a provision that would change the definition of “community financial institution” under the Federal Home Loan Bank (FHLB) Act to include credit unions. Berger said the change in definition “would ensure more credit unions can offer affordable, high-quality mortgages to consumers by expanding eligibility for FHLB membership.”
NAFCU has been campaigning since at least 2018 for these changes.
In May 2020, then NCUA chairman Rodney Hood testified before the Senate Banking Committee with demands that included increasing the limit on member business loans to 20% and the permanent increase in the federal credit union loan maturity limit of 15 to 30 years.
In March, Senate Banking Committee members Tim Scott, RS.C., and Catherine Cortez Masto, D-Nev., Introduced legislation that would give the NCUA greater flexibility in setting maturity limits loans under the Federal Credit Union Act.