In a letter to credit unions on Tuesday, NCUA Chairman Rodney Hood said that the agency’s board approved an interim final rule that amends regulatory requirements related to the SBA’s Paycheck Protection Program loans and the Board of Governors of the Federal Reserve System’s PPP lending facility advances.
The letter, which states that the move is intended to encourage credit union participation in the PPP, outlines the regulatory changes and clarifies SBA’s guidance on PPP loans to credit union officials and non-members.
“The CARES Act provided relief to credit union members through PPP loans,” Hood said in the letter. “To encourage credit union participation in this program, the NCUA Board has made necessary changes to the NCUA’s regulations.”
Key points of Hood’s letter regarding PPP loans include:
- PPP loans will not be subject to NCUA’s enhanced underwriting/monitoring requirements for commercial loans. The loans are also not included in a CU’s net member-business lending calculation to determine compliance with the MBL limit.
- Credit unions may extend PPP loans to members of a credit union’s board of directors (if they are a small business owner separate from this role) and outlines expectations for lending in this type of scenario.
- Federal credit unions seeking to lend to a non-member must ensure that such a borrower becomes a member of the credit union prior to the loan closing.
- Changes to NCUA rules for calculating net worth ratios in relation to PPPLF-pledged loans.
The Federal Reserve has indicated that it will supply liquidity to participating financial institutions through term financing backed by PPP loans, and only SBA-guaranteed PPP loans that are originated by eligible institutions may be pledged as collateral to the Federal Reserve Banks, Hood stated. The Federal Reserve press release can be accessed by clicking here.
The rule, which can be accessed on NCUA’s website, will become effective once it is published in the Federal Register.