I am not certain if you referring to strictly business/commercial loans or residential mortgages for non-owner occupied properties?

I, too, had the same situation last November; if anyone can help Doris and me out the assistance would be greatly appreciated.

Thank you,

Larry Wyatt

Director - Real Estate Lending

Water and Power Community C U

Hi Doris,

Our Business Services Department at OSU Federal Credit Union in Corvallis, OR does annual reviews based on loan amount.  If you would like a contact. I am more than happy to provide this information to you.  Please email me at ltaylor@osufederal.com if you want the information.

Thanks

Hi Doris,

I am interested in this topic as well.  I would like to know if the annual reviews have turned members away from applying with the credit union for their investment property financing.  Thanks for raising the question because it is very much a credit union issue for all credit unions.

Shelly Calhoun

Mortgage Originations Manager

IBM Southeast EFCU

Boca Raton, Florida

Loans meeting the criteria for member business loans  (MBLs) as defined in NCUA part 723 (such as non-owner occupied investment property loans) will be viewed by regulators as a business loan.  As you stated, part 723 requires a business loan policy.  There is a requirement that one of the components in that policy is the receipt of periodic financial statements and that will be the expectation of the regulators.   It is a very normal and long time practice of financial institutions originating business loans to require at least annual financial information updates including such things as personal and business tax returns, personal financial statements, business operating statements and the like.  I would be very surprised if your bank and savings bank competitors are not requiring the same. It should be noted that your loan documents/agreements need to contain language stating the requirements for on-going financial information.   As you probably know there are also Call Report considerations for MBLs.

If you want to discuss policy, procedures or practices in more detail I would be happy to share what we are doing.

Larry Accola, Sr. Vice President

Business Loans & Services

Royal Credit Union

Eau Claire, WI

larry.accola@rcu.org

Larry is right that it is customary for the borrower to submit annual financial statements for business loans, regardless of whether or not real estate is involved.

Doris' concern is also well-founded, if the borrower involved is an individual (not a business) and the property involved is a 1-4 family residential property that is non-owner occupied (NOO) . In this case it is not customary for individuals on 1-4 family NOO properties to submit anything after closing, as this is a standard secondary market program with Fannie and Freddie, who never required on-going financials and neither have private investors.

Other financial institutions may require ongoing financials if they portfolio this 1-4 family NOO product, but I am not aware of any.

Thomas Pinkowish, President

REMOC Associates, LLC

35 Pratt Street  Suite 104

Essex, CT  06426

www.remoc.com

860 767 6844    office

860 767 6843    fax

tpink@remoc.com

Thomas is correct regarding secondary market requirements for NOO properties, and I have used his point to argue with examiners (and I won).  As long as the rental property is not the members primary source of income and limited to 1-4 units I treat the loan like a residential real estate loan with no annual review required as I could turn around and sell this loan to Fannie or Freddie if needed. I do count these loans towards the MBL cap as technically the NCUA considers them MBLs as far as your 5300 reporting.  We included a brief explanation of this in our MBL policy.

Caleb Cook

Lending Manager

Sound Credit Union

Tacoma, WA

ccook@soundcu.com