Written by Steve Van Beek
Yesterday's blog post stated it would be great if NCUA updated their legal opinion letters when they were superseded. Well, we had an eagle-eyed reader who was searching NAFCU's Book of Answers (member-only) and asked if we were going to update our Q&A. We sure are - it is below (and will be updated in the Book of Answers soon):
Question: One of my credit union's members has done plumbing work on the side over the years. Recently, her "side" business has taken off, and she'd like to expand. She approached us for a loan to purchase three vans to help the expansion. We are aware of NCUA's Member Business Loans Regulation, and the loan-to-value (LTV) requirements found at 12 C.F.R. §723.7. That regulation, however, exempts the LTV requirements for vans - as long as the van is not part of a fleet. We'd like to avoid the LTV requirements if we can, but our commercial lending department cannot agree on what constitutes a "fleet." Has NCUA issued guidance in this area?
Answer: Yes. NCUA has defined “fleet” in Legal Opinion Letter 12-0764 which superseded NCUA’s prior guidance from Legal Opinion Letter 05-1038. As you noted, NCUA's Member Business Loans (MBL) Regulation contains LTV requirements for secured loans. Subject to certain exceptions or an NCUA waiver, the maximum LTV for secured MBLs is 80 percent. The LTV requirement, however, does not apply to cars, vans, SUVs, or pick-up trucks - as long as the vehicle is not part of a "fleet." 12 C.F.R. § 723.7(e). The regulation does not define "fleet," however, the 2012 opinion letter defines “fleet” as “five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire. In the letter, NCUA emphasized that the “fleet” definition is composed of the numerical component – five – as well as the central control and used for a business purpose component. Both components are required before the vehicles would be deemed to be part of a fleet. In your question, the member has three vans and would be below the numerical component. Thus, the vans would not be part of a “fleet” and the credit union would not be bound by the LTV requirements of 12 C.F.R. § 723.7.
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NAFCU's Book of Answers. We are working on an update to our Book of Answers and we want your feedback. If you are a current user of the Book of Answers - we look forward to any feedback you have on how to improve this NAFCU member benefit. What would make the Book of Answers better? Is it too big and bulky? Should the Book of Answers be split up by sections (i.e., all lending questions on one PDF)?
If you are a NAFCU member and haven't used the Book of Answers, take a look (log-in required) and let us know what you think.
As always, any and all feedback is appreciated. Feel free to leave a comment on this blog post or email us: compliance@nafcu.org.
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