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Board Approves Second-Chance Policy Changes

November 2019
Board Approves Second-Chance Policy Changes

Board Action Bulletin

NCUA Seeks Comment on Higher Real Estate Appraisal Threshold

ALEXANDRIA, Va. (Nov. 21, 2019) – The National Credit Union Administration Board held its tenth open meeting of 2019 at the agency’s headquarters today and unanimously approved two items:

  • A final interpretive ruling and policy statement to expand career opportunities for individuals convicted of certain minor offenses.
  • A proposed rule raising the threshold for requiring a residential real estate appraisal from $250,000 to $400,000.

The Chief Financial Officer briefed the Board on the performance of the National Credit Union Share Insurance Fund.

Policy Changes Would Offer Second Chances on Some Prohibitions

The NCUA Board approved a final interpretive ruling and policy statement allowing people convicted of certain minor offenses to return to work in the credit union industry without applying for the Board’s approval.

“I am pleased with the NCUA Board’s approval of the final second chance rule,” NCUA Chairman Rodney E. Hood said. “The second chance final rule expands the list of exceptions to the application requirement, providing employment opportunities to those who pose no risk to the safety and soundness of the credit union system. This adjustment is not only about regulatory relief, but also it is simply the right thing to do. Expanding career opportunities for those who have taken responsibility for past indiscretions is consistent with Americans' shared values of forgiveness and redemption.”

Section 205(d) of the Federal Credit Union Act prohibits anyone convicted of a criminal offense involving dishonesty or breach of trust, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, from participating in the affairs of an insured credit union. An individual in those circumstances must apply to the NCUA Board for its consent in order to work in a credit union.

The policy change expands the list of exceptions to the application requirement. Specifically, convictions or program entries for offenses involving insufficient funds checks of aggregate moderate value, small dollar simple theft, false identification, simple drug possession, and isolated minor offenses committed by covered persons as young adults will not require an application.

Since the Board’s initial proposal in July, the Federal Deposit Insurance Corporation issued a notice of proposed rulemaking that also aims to expand employment opportunities in the banking system for those with a history of minor, non-violent offenses.

The interpretive rule and policy statement will become effective 30 days after publication in the Federal Register.

Proposed Rule Would Lift Residential Real Estate Appraisal Threshold

The threshold for requiring appraisals for real estate transactions secured by single 1-to-4-family residential property would increase from $250,000 to $400,000 under a proposed rule approved by the NCUA Board.

“The NCUA has taken another positive step forward in regulatory reform by raising the appraisal level for residential mortgage loans,” Hood said. “The process of securing a loan and purchasing a home can be time-consuming and stressful, particularly for middle- and working-class borrowers and those who live in underserved areas. So any reasonable steps we can take to reduce the time needed to complete real estate transactions, to simplify the process, and to lower costs are well worth considering.”

Federally insured credit unions would still need to obtain a written estimate of market value for properties that fall below the appraisal threshold, and the proposed rule incorporates the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice.

The proposed change would align the NCUA’s appraisal rule with a final rule issued in October by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

Comments on the proposed rule must be received within 60 days of publication in the Federal Register.

Strong Share Insurance Fund Operating Trends Continue

The National Credit Union Share Insurance Fund posted net income of $24.0 million in the third quarter of 2019, primarily due to strong investment income earnings.

The Share Insurance Fund’s net position was $16.7 billion at the end of the third quarter, and the equity ratio was 1.33 percent. The NCUA calculated the equity ratio on an insured share base of $1.2 trillion.

Third-quarter investment and other income was $80.1 million or a 1.4 percent decrease in income from $81.2 million during the second quarter of 2019. Operating expenses were $48.2 million. The provision for insurance losses increased by $7.9 million.

For the third quarter of 2019, the Chief Financial Officer reported:

  • The number of CAMEL codes 4 and 5 credit unions decreased 2.0 percent from the second quarter of 2019 to 200 from 204. Assets for these credit unions increased 1.8 percent from the second quarter of 2019 to $11.2 billion from $11.0 billion.
  • The number of CAMEL code 3 credit unions decreased 1.3 percent from the second quarter of 2019 to 861 from 872. Assets for these credit unions decreased 13.9 percent from the second quarter of 2019 to $43.4 billion from $50.4 billion.

Two federally insured credit unions failed through the third quarter of 2019, compared to six through the third quarter of 2018. Total year-to-date losses associated with failed credit unions is $40.3 million, compared to $752.5 million in the third quarter of 2018.

The third quarter figures are preliminary and unaudited.

The NCUA tweets all open Board meetings live. Follow @TheNCUA on Twitter, and access Board Action Memorandums and NCUA rule changes at The NCUA also live streams, archives and posts videos of open Board meetings online.

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