ATTORNEY: Now doctor, isn't it true that when a person dies in his sleep, he doesn't know about it until the next morning? WITNESS: Did you actually pass the bar exam? (Courtesy of Lowell Hare)
Although we all hope for solutions to the government shutdown and the debt ceiling even the federal courts may not be immune. The U.S. Administrative Office of the Courts has announced that the federal courts will be stay open through October 18. After that there may be some question. In the meantime, the U.S. Attorney Offices have put on a hold on processing civil cases, devoting their resources to criminal matters. Banks have their own problems with the shutdown, ranging from the SBA to FHA inability to fully process loans to partial shutdowns of the Consumer Financial Protection Bureau and S.E.C. (the inability of the CFPB to issue new regulations may be one of the hidden benefits of the shutdown).
On the Credit Union cap and low income designation, I owe an apology to Senator Tom Udall and my readers. In my last Blog, I stated that Senator Udall was a co-sponsor of legislation to abolish the 12.5 % asset cap on Credit Union member business loans. I had the wrong Udall. Another Udall, Senator Mark Udall of Colorado, is the sponsor of the legislation. New Mexico’s Senator Udall is not the sponsor of the any cap abolishment legislation. Thanks to the many savvy readers who caught my error and pointed it out.
The more one looks at the low income designation for credit unions, which allows those designated as such to be free of the cap on member business loan, the more intriguing the designation becomes. Although the low income designation is apparently not based on actual member earnings, the regulations state that designation is based on “data” “obtained through examinations” . However, the actual designation, as explained in a prior Blog, is based on median family income for the metropolitan area where the members live. The regulations provide “[m]ember earnings will be estimated based on data reported by the [Census Bureau] for the geographic area where the member lives.” 12 C.F.R. §701.34(a)(2)
In August 2012 the NCUA notified more than 1000 Credit Unions that they were entitled to the low income designation—doubling the total number of Credit Unions having the low income designation. Besides the member business lending cap being waived, other benefits of the designation are eligibility for Community Development Revolving Loan Fund grants and low-interest loans, ability to accept deposits from non-members, and authorization to obtain supplemental capital. The NCUA action was part of a 2012 drought relief and recovery package which made gaining the designation less burdensome, according to the NCUA.
Although the information is not current, it appears that only one New Mexico federal Credit Union has been chosen for the low income designation—New Mexico Educators Federal Credit Union. Since gaining the low income designation, New Mexico Educators Federal Credit Union has been busy in Albuquerque and Santa Fe. Although I mentioned the loan in a prior Blog, New Mexico Educators recently financed the purchase of the Hyatt Hotel in downtown Albuquerque for a well known New Mexico hotel operator. There is apparently no limitation on the type of member business loans which the Credit Union can make, and there is no requirement of lending to the impoverished or to business located in high poverty areas.
New Mexico lost a valued banker, Paul Boushelle, on September 23. Paul was past President of the New Mexico Bankers Association in the 1990’s and later lobbied for the Association in Santa Fe. His memorial service on October 5 was full of the states’ bankers and his close friends—of which there were many.
Do good,
Marshall Martin
505 982 4611 Office 505 228 8506 Cell
