441-720-0320 - Collateral and Security Requirements

441-720-0320. Collateral and Security Requirements

(1) All member business loans must be secured by collateral in accordance with this section, except for the following:

(a) A credit card line of credit granted to nonnatural person members that is limited to routine purposes normally made available under such lines of credit; or

(b) A loan made by a credit union where the loan and the credit union meet each of the following criteria:

(A) The amount of the loan does not exceed $50,000;

(B) The aggregate of unsecured member business loan under this paragraph (1)(b) does not exceed 10% of the credit union's net worth;

(C) The loan is guaranteed or insured by a financially responsible guarantor or insurer and the credit union has determined that the guarantor or insurer has the financial capacity and willingness to perform under the terms of the guaranty or insurance agreement;

(D) The credit union has a net worth of at least 7%; and

(E) The credit union submits reports to the Division with its NCUA 5300s, providing numbers and such other detail as may be required by the Director to demonstrate compliance with this paragraph (1)(b).

(2) In the case of a member business loan secured by collateral on which the credit union will have a first lien, the credit union may grant the loan with a LTV ratio in excess of 80% only where the value in excess of 80% is:

(a) Covered through acquisition of private mortgage or equivalent type insurance provided by an insurer acceptable to the credit union; or

(b) Insured or guaranteed, or subject to advance commitment to purchase, by an agency of the Federal government, state, or any of its political subdivisions. In no event may the LTV ratio exceed 95%;

(3) In the case of a member business loan secured by collateral on which the credit union will have a second priority lien, the credit union may not grant the loan with a LTV ratio in excess of 80%; and

(4) In the case of member business loans secured by the same collateral,

(a) On which the credit union will have a first lien as well as other lesser priority liens, the credit union may grant the loans with a LTV ratio in excess of 80% only if section (2) of this rule is satisfied. In no event may the LTV ratio exceed 95%; and

(b) On which the credit union will have lesser priority liens but no first lien, the credit union may not grant loans with a LTV ratio in excess of 80%.

(5) Principals, other than a not for profit organization as defined by the Internal Revenue Service Code (26 U.S.C. 501) must assume personal liability and guarantee the loan.

(FCS 2-2002, f. & cert. ef. 8-27-02)

Stat. Auth.: ORS 723.102 & 723.156

Stats. Implemented: ORS 723.156 & 723.502

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