§ 704.7 Lending. ( a ) *Policies.* A corporate credit union must operate according to a lending policy which addresses, at a minimum: ( 1 ) Loan types and limits;
( 2 ) Required documentation and collateral; and
( 3 ) Analysis and monitoring standards.
( b ) *General.* Each loan or line of credit limit will be determined after analyzing the financial and operational soundness of the borrower and the ability of the borrower to repay the loan.
( c ) *Loans to members* — ( 1 ) *Credit unions.* ( i ) The maximum aggregate amount in unsecured loans and lines of credit from a corporate credit union to any one member credit union, excluding CLF-related bridge loans and pass-through and guaranteed loans from the CLF and the NCUSIF, must not exceed 50 percent of the corporate credit union's total capital.
( ii ) The maximum aggregate amount in secured loans (excluding those secured by shares or marketable securities and member reverse repurchase transactions) and unsecured loans (excluding pass-through and guaranteed loans from the CLF and the NCUSIF) and lines of credit from a corporate credit union to any one member credit union must not exceed 150 percent of the corporate credit union's total capital.
( 2 ) *CUSOs.* Any loan or line of credit from a corporate credit union to a CUSO must comply with § 704.11.
( 3 ) *Other members.* The maximum aggregate amount of loans and lines of credit from a corporate credit union to any other one member must not exceed 15 percent of the corporate credit union's total capital plus pledged shares.
( d ) *Loans to nonmembers* — ( 1 ) *Credit unions.* A loan to a nonmember credit union, other than through a loan participation with another corporate credit union or a CLF-related bridge loan, is only permissible if the loan is for an overdraft related to the providing of correspondent services pursuant to § 704.12. Generally, such a loan will have a maturity of one business day.
( 2 ) *CUSOs.* Any loan or line of credit must comply with § 704.11.
( e ) *Member business loan rule.* Loans, lines of credit and letters of credit to: ( 1 ) Member credit unions are exempt from part 723 of this chapter;
( 2 ) CUSOs are not subject to part 723 of this chapter.
( 3 ) Other members not excluded under § 723.1(b) of this chapter must comply with part 723 of this chapter unless the loan or line of credit is fully guaranteed by a credit union or fully secured by U.S. Treasury or agency securities. Those guaranteed and secured loans must comply with the aggregate limits of § 723.8 but are exempt from the other requirements of part 723.
( f ) *Participation loans with other corporate credit unions.* A corporate credit union is permitted to participate in a loan with another corporate credit union provided the corporate retains an interest of at least 5 percent of the face amount of the loan and a master participation loan agreement is in place before the purchase or the sale of a participation. A participating corporate credit union must exercise the same due diligence as if it were the originating corporate credit union.
( g ) *Prepayment penalties.* If provided for in the loan contract, a corporate credit union is authorized to assess prepayment penalties on loans.
[62 FR 12938, Mar. 19, 1997, as amended at 64 FR 57365, Oct. 25, 1999; 67 FR 65655, Oct. 25, 2002; 68 FR 56550, Oct. 1, 2003; 75 FR 34621, June 18, 2010; 80 FR 25938, May 6, 2015; 80 FR 57284, Sept. 23, 2015; 85 FR 71826, Nov. 12, 2020]