September 14, 1998
Anthony C. Launi, Manager
MCBR Federal Credit Union
1355 Piccard Drive
P.O. Box 1573
Rockville, Maryland 20850
Dear Mr. Launi:
You have asked whether you can service loans
granted by the Housing Opportunities Commission. Yes, it is an
incidental power to the ability to accept public unit funds.
You have also asked whether these funds are insured. Yes, up
to $100,000, if the public funds are lawfully invested and properly
maintained in the credit union.
The Housing Opportunities Commission (HOC),
located in Kensington, Maryland, lends up to $7,500 to first-time
home buyers for down payment and closing costs. HOC wants MCBR
Federal Credit Union to service these loans, with the following
responsibilities: order a coupon book for each borrower; collect
monthly payments and deposit all funds in a noninterest bearing
account; send all funds for the month to HOC with various reports;
and handle delinquencies for the first 60-90 days. You anticipate
that the program will be terminated within two years, and you
will be servicing 1,000 loans, with each loan having a seven-year
term.
All FCU's are authorized to accept and maintain
certain types of nonmember accounts. Section 101(5) of the FCU
Act defines "member account" to include accounts of
nonmember units of state governments and political subdivisions
thereof.
The term public unit is defined in Section
745.1(c) of NCUA's Regulations to include any state of the United
States. The term political subdivision is defined in §745.1(d)
of NCUA's Regulations to include:
[A]ny principal department of such public unit,
(1) the creation of which subdivision or department has been expressly
authorized by state statute, (2) to which some functions of government
have been delegated by state statute, and (3) to which funds have
been allocated by statute or ordinance for its exclusive use and
control.
Anthony C. Launi
Page 2
HOC qualifies as a political subdivision of
a public unit under to NCUA Regulations and may deposit funds
in the credit union up to the limits set forth in §701.32
of NCUA's Regulations. The credit union may provide the servicing
of these loans as incidental to its authority to accept loan payments
and deposit them into HOC's public unit account.
Part 745 of NCUA's Regulations sets forth the
rules for the insurance of member accounts. Section 745.1(b)
of NCUA's Regulations defines member accounts to include nonmember
public units and political subdivisions. Such accounts are insured
up to $100,000, assuming the funds are lawfully invested and properly
maintained in the credit union.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MJMcK:bhs
SSIC 3501
98-0607