[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR705.7]



[Page 430-431]

 

                       TITLE 12--BANKS AND BANKING

 

            CHAPTER VII--NATIONAL CREDIT UNION ADMINISTRATION

 

PART 705_COMMUNITY DEVELOPMENT REVOLVING LOAN PROGRAM FOR CREDIT UNIONS

--Table of Contents

 

Sec. 705.7  Loans to participating credit unions.



    (a) Amount and recording of loans. A participating credit union will 

be eligible to receive up to $300,000 in the aggregate, as determined by 

the NCUA Board, in the form of a loan from the Community Development 

Revolving Loan Fund for Credit Unions. The amount of the loan will be 

based on funds availability, the creditworthiness of the participating 

credit union, financial need, and a demonstrated capability of a 

participating credit union to provide financial and related services to 

its members. At the discretion of NCUA, a loan will be recorded by a 

participating credit union as either a note payable or a nonmember 

deposit.

    (b) Matching requirements. Participating credit unions will be 

encouraged to develop, as rapidly as possible, a permanent source of 

member shares.

    (1) Generally loan monies made available must be matched by the 

participating credit union by increasing its share deposits in an amount 

equal to the loan amount. However, any loan monies matched by member 

share deposits will be credited as a two-for-one match. Nonmember share 

deposits accepted to meet the matching requirement are not subject to 

the 20% limitation on nonmember deposits under Sec. 701.32. 

Participating credit unions must meet this matching requirement within 

one year of the approval of the loan application and must maintain the 

increase in the total amount of share deposits for the duration of the 

loan. Once the loan is repaid, nonmember share deposits accepted to meet 

the matching requirement are subject to Sec. 701.32.

    (2) Upon approval of its loan application, and before it meets its 

matching requirement, a participating credit union may receive the 

entire loan commitment in a single payment. If any funds are withheld, 

the remainder of the funds committed will be available to the 

participating credit union only after it has documented that it has met 

the match requirement for the total amount of the loan committed.

    (3) Failure of a participating credit union to generate the required 

match within one year of the approval of the loan will result in the 

reduction of the loan proportionate to the amount of match actually 

generated. Payment of any additional funds initially approved will be 

limited as appropriate to reflect the revised amount of the loan 

approved. Any funds already advanced to the participating credit union 

in excess of the revised amount of loan approval must be repaid 

immediately to NCUA. Failure to repay such funds to NCUA upon demand 

shall result in the default of the entire loan.

    (c) Terms and repayment. (1) Assistance made available through 

Program loans, whether recorded by the credit union as a note payable or 

nonmember deposit at NCUA's direction, is in the form of a loan and must 

be repaid to NCUA. All loans will be scheduled for repayment within the 

shortest time compatible with sound business practices and with 

objectives of the Program, but in no case will the term exceed five 

years.

    (2) Semiannual interest payments (beginning six months after the 

initial distribution of a loan) and semiannual principal payments 

(beginning one year after the initial distribution of a loan) will be 

required.

    (d) Interest rates. Loans made under this part shall bear interest 

at a fixed annual percentage rate of not more than 3 percent and not 

less than 1 percent as determined by the NCUA Board.



[[Page 431]]



    (e) Default, collections and adjustments. The terms of each loan 

agreement shall provide for the immediate acceleration of the unpaid 

balance for breach or default in the performance by the participating 

credit union of the terms or conditions of the loan. This will include 

misrepresentation, default in making interest/principal payments, 

failure to report, insolvency, failure to maintain adequate match for 

the duration of the loan period, etc. The unpaid balance will also be 

accelerated and immediately due if any part of the loan funds are 

improperly used, or if uninvested loan proceeds remain unused for an 

unreasonable or unjustified period of time.



[58 FR 21646, Apr. 23, 1993, as amended at 61 FR 50696, Sept. 27, 1996]