Final rules on the current expected credit loss methodology and capitalization of interest, and action on the federal credit union (FCU) loan interest rate ceiling, are on the agenda for the June 24 open meeting of the federal credit union regulator’s board, according to a notice slated for publication in Wednesday’s Federal Register.
The National Credit Union Administration (NCUA) Board last acted on the loan rate ceiling in January 2020, keeping it at 18% (and unchanged for several years). This cap is scheduled to revert to a 15%, as set under the Federal Credit Union Act, unless the board acts in advance. If no action is taken in June, the board could still take the matter up during its July open meeting and beat the Sept. 10 expiration date. (There is no open meeting set for August.)
The two final rules up for action next week focus on:
- Current expected credit loss (CECL) methodology (Part 702 of the agency rules and regulations). The NCUA proposed a rule last July that would phase in over three years the day-one effect of the CECL accounting standard on credit unions’ regulatory capital levels. Under the proposal credit unions with $10 million or less in assets would be exempt from having to use the CECL standard to figure loan loss reserves.
- Capitalization of interest (Part 741, Appendix B). The proposed rule, issued last November, would remove the prohibition against federally insured credit unions capitalizing interest – that is, financing unpaid interest – in loan workouts and modifications. It would, among other things, also set documentation requirements to help ensure that the addition of unpaid interest to the principal balance of a mortgage loan does not hinder the borrower’s ability to become current on the loan.
Next week’s meeting begins at 10 a.m. ET and, due to the pandemic, is open to the public via live audio webcast only.