Final Member Business Lending Rule Ushers in a ‘New Era’

NCUA’s new final MBL rule will allow credit unions to help more small business owners open shop or expand their businesses.

The rule (Part 723) was unanimously approved by the National Credit Union Administration (NCUA) Board in its second meeting of 2016 on Thursday, February 18. It gives credit unions greater latitude to make commercial lending decisions. This action came despite a deluge of bank-lobby opposition. The Northwest Credit Union Association supports the rule, according to John Trull, Assistant Vice President of Regulatory Advocacy. “The rule,” Trull says, “will allow credit unions to compete for loans on a closer-to-level playing field.”

Key changes in the final rule include:

  • Giving credit union loan officers the ability, under certain circumstances, to not require a personal guarantee;
  • Replacing explicit loan-to-value limits with the principle of appropriate collateral and eliminating the need for a waiver;
  • Lifting limits on construction and development loans;
  • Exempting credit unions with assets under $250 million and small commercial loan portfolios from certain requirements; and
  • Affirming that non-member loan participations do not count against the statutory Member Business Lending (MBL) cap.

A brief summary is available online.

At the urging of the Association and Northwest credit union advocates, the NCUA made a number of changes to the initial proposal.

  • To provide more flexibility on Loan to Value Ratios, the final rule replaces “the lesser of the purchase price or market value for collateral held 12 months or less, and market value for collateral held longer than 12 months” with “the current collateral value.” The current collateral value is the most up-to-date value of the collateral based on appropriate valuation methodologies according to industry standards.
  • The adopted rule excludes government-guaranteed loan balances from the single-borrower limit.
  • The NCUA added a new section 723.10—state regulation of business lending that grandfathers states that have existing MBL rules, and allows state supervisory authorities to adopt state specific rules.

The personal-guarantee provision of the rule will be effective within 60 days of the rule’s publication in the Federal Register. The rest of the rule goes into effect on January 1, 2017, giving credit unions time as they work to implement the broad changes.

“This is a best case scenario for Northwest credit unions located in Oregon and Washington, two states that currently administer their respective MBL rules,” said Trull. “A lot of credit goes to Northwest credit union leaders who strongly advocated for this option, and the NCUA Board, particularly Vice Chair Metsger and his policy staff Mike Radway, who worked diligently behind the scenes to ensure state authority was maintained.”

Questions about this story? Contact Lynn Heider: 503.350.2225,

Posted in Advocacy News, NCUA.