Source: https://www.law.cornell.edu/cfr/text/12/701.23
Timestamp: 2019-04-23 14:21:41+00:00

Document:
Section 701.23. Purchase, sale, and pledge of eligible obligations.
12 CFR § 701.23 - Purchase, sale, and pledge of eligible obligations.
§ 701.23 Purchase, sale, and pledge of eligible obligations.
This section governs a federal credit union's purchase, sale, or pledge of all or part of a loan to one of its own members, subject to a limited exception for certain well capitalized federal credit unions, where no continuing contractual obligation between the seller and purchaser is contemplated. For purchases of eligible obligations, except as described in paragraph (b)(2) of this section, the borrower must be a member of the purchasing federal credit union before the purchase is made. A federal credit union may not purchase a non-member loan to hold in its portfolio.
(1)Eligible obligation means a loan or group of loans.
(2)Student loan means a loan granted to finance the borrower's attendance at an institution of higher education or at a vocational school, which is secured by and on which payment of the outstanding principal and interest has been deferred in accordance with the insurance or guarantee of the Federal Government, of a State government, or any agency of either.
(iv) Real estate-secured loans, from any source, if the purchaser is granting real estate-secured loans pursuant to § 701.21 on an ongoing basis and if the purchase will facilitate the purchasing credit union's packaging of a pool of such loans to be sold or pledged on the secondary mortage market. A pool must include a substantial portion of the credit union's members' loans and must be sold promptly.
(ii)Eligible obligations of a liquidating credit union. Eligible obligations of a liquidating credit union without regard to whether they are obligations of the liquidating credit union's members.
(iii) For purchases under paragraph (b)(1)(ii) of this section, any advance written approval required by § 741.8 of this chapter is obtained before consummation of such purchase.
(iv) An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the Federal credit union makes the final underwriting decision and the sales or lease contract is assigned to the Federal credit union very soon after it is signed by the member and the dealer or leasing company.
(5)Grandfathered purchases. Subject to safety and soundness considerations, a federal credit union may hold any of the loans described in paragraph (b)(2) of this section provided it was authorized to purchase the loan and purchased the loan before July 2, 2012.
(2) A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the seller's office.
(iii) A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations.
(2) The pledge agreement shall identify the eligible obligations covered by the agreement.
(e)Servicing. A Federal credit union may agree to service any eligible obligation it purchases or sells in whole or in part.
(f)10 Percent limitation. The total indebtedness owing to any Federal credit union by any person, inclusive of retained and reacquired interests, shall not exceed 10 percent of its unimpaired capital and surplus.
(1)Conflicts of interest. No federal credit union official, employee, or their immediate family member may receive, directly or indirectly, any compensation in connection with that credit union's purchase, sale, or pledge of an eligible obligation under the provisions of § 701.23.
(iv) Payment by a person other than the federal credit union of compensation to a volunteer official, non-senior management employee, or their immediate family member, for a service or activity performed outside the credit union provided that the federal credit union, the official, employee, or their immediate family member has not made a referral.
(3)Business associates and family members. All transactions under this section with business associates or family members not specifically prohibited by paragraph (g)(1) of this section must be conducted at arm's length and in the interest of the federal credit union.
(4)Definitions. The definitions in § 701.21(c)(8)(ii) of this part apply to this section.
(iv) An analysis of the credit union's prior experience with the purchase of eligible obligations.
(2)Approval process. A regional director will provide a written determination on a request for expanded authority within 60 calendar days after receipt of the request; however, the 60-day period will not begin until the requesting credit union has submitted all necessary information to the regional director. The regional director will inform the requesting credit union, in writing, of the date the request was received and of any additional documentation that the regional director requires in support of the request. If the regional director approves the request, the regional director will establish a limit on loan purchases as appropriate and subject to the limitations in this section. If the regional director does not notify the credit union of the action taken on its request within 60 calendar days of the receipt of the request or the receipt of additional requested supporting information, whichever occurs later, the credit union may purchase loans it requested under paragraph (b)(2) of this section.
(3)Appeal to NCUA Board. A Federal credit union may request the regional director to reconsider a denied request for expanded authority and/or file an appeal with the NCUA Board in accordance with the procedures set forth in subpart B to part 746 of this chapter.

References: § 701

§ 701
 § 701
 § 741
 § 701
 § 701