Washington Administrative Code

(1) Credit unions may enter into arrangements with third parties in order for the third party or credit union to offer the third party's products and services to the credit union's members. These arrangements are referred to in this rule as commercial arrangements.In connection w…

(1) RCW 31.12.545 authorizes the acceptance, in the director's discretion, of independent audit reports in lieu of the examination required thereunder. In order to be considered for acceptance in lieu of an examination, an audit must meet the following conditions:(a) The audit wa…

(1) Except as otherwise provided herein, no official or employee of a credit union, or immediate family member of an official or employee of a credit union, may receive, directly or indirectly, any commission, fee, or other compensation in connection with any loan made by the cre…

(1) The rates, terms and conditions on any loan either made to, or endorsed or guaranteed by(a) An official(b) An immediate family member of an official, or(c) Any individual having a common ownership, investment or other pecuniary interest in a business enterprise with an offici…

Unless the context clearly requires otherwise, as used in this chapter:(1) "Compensation" includes nonmonetary items, except those of nominal value.(2) "Immediate family member" means a spouse or other family member living in the same household.(3) "Loan" includes line of credit.…

WAC 208-444-020, 208-444-030, and 208-444-040 will take effect on the date that these rules are determined by the Board of the National Credit Union Administration (NCUA) to be substantially equivalent to NCUA rules.[Statutory Authority: RCW 31.12.535 and 43.320.040. WSR 97-23-07…

(1) Definition of MBL. "Member business loan" or "MBL" includes any loan, line of credit, letter of credit, or any unfunded commitment to make a loan, where the borrower intends to use the proceeds for any of the following purposes:(a) Commercial;(b) Corporate;(c) Investment prop…

(1) Who is ineligible to receive a member business loan? You may not grant a member business loan to the following:(a) Your chief executive officer (typically this individual holds the title of president or treasurer/manager);(b) Any assistant chief executive officers (e.g., assi…

Unless the director grants a waiver, a credit union that makes MBL development or construction loans is subject to the following requirements:(1) The aggregate of all such loans may not exceed fifteen percent of net worth. To determine the aggregate, you may exclude any portion o…

The board of directors must adopt specific member business loan policies and review them at least annually. The credit union must utilize the services of an individual with at least two years direct experience with the type of lending the credit union will be engaging in, except …

At a minimum, your member business loan policy must address the following:(1) The types of MBL you will make;(2) Your trade area;(3) The maximum amount of your assets, in relation to net worth, that you will invest in MBL;(4) The maximum amount of your assets, in relation to net …

Unless the director grants a waiver:(1) All member business loans must be secured by collateral in accordance with this section, except the following:(a) A credit card line of credit granted to nonnatural persons that is limited to routine purposes normally made available under s…

Unless the director grants a waiver for a higher amount, the aggregate amount of member business loans to a member or associated members may not exceed the greater of:(1) Fifteen percent of the credit union's net worth; or(2) One hundred thousand dollars.[Statutory Authority: RCW…

(1) Step 1. Calculate the numerator by adding together the amount of the member business loans to the member and associated members (if any). From this amount, subtract any portion:(a) Secured by shares or deposits in the credit union making the extension of credit or in other cr…

You may seek a waiver for a type of member business loan in the following areas:(1) Development and construction loan requirements under WAC 208-460-030;(2) Loan-to-value ratios under WAC 208-460-060;(3) Maximum loan amount to a member or associated members under WAC 208-460-070;…

(1) To obtain a waiver under WAC 208-460-090, a credit union must submit its request to the director. The waiver request must contain the following:(a) A copy of your member business loan policy;(b) The higher limit sought (if applicable);(c) An explanation of the need to raise t…

Nondelinquent member business loans may be classified based on factors such as the adequacy of analysis and supporting documentation. You must classify potential loss loans as either substandard, doubtful, or loss. The criteria for determining the classification of loans are:(1) …

The following schedule sets the minimum amount you must reserve for classified member business loans:ClassificationAmount RequiredSubstandard10% of outstanding balance unless other factors (for example, history of such loans at the credit union) indicate a greater or lesser amoun…

The aggregate limit on the amount of a credit union's member business loans is the lesser of:(1) One and three quarters times the credit union's net worth; or(2) Twelve and one quarter percent of the credit union's total assets.[Statutory Authority: RCW 31.12.426(1), 31.12.516(2)…

(1) Credit unions that meet any one of the following four criteria qualify for an exception from the aggregate member business loan limit in WAC 208-460-130:(a) Credit unions that have a low-income designation;(b) Credit unions that participate in the Community Development Financ…

(1) The exception under WAC 208-460-140 (1)(a) and (b) is effective upon written notice to the director of such designation or participation.(2) To obtain an exception under WAC 208-460-140 (1)(c) or (d), a credit union must submit its request to the director. An exception is not…

You must separately identify member business loans in your records and in the aggregate on your financial reports.[Statutory Authority: RCW 31.12.426(1), 31.12.516(2), 43.320.040. WSR 01-10-084, § 208-460-160, filed 5/1/01, effective 6/1/01.]

For purposes of this chapter, the following definitions apply:(1) The "amount" of a MBL includes:(a) Any unfunded commitment to make the loan; (b) The outstanding balance of the loan; and (c) Any undisbursed proceeds of the loan.(2) A person is "associated" with another if they h…

A credit union may admit to membership those persons qualified for membership who are within its field of membership as stated in its bylaws. A credit union may amend its field of membership bylaws to add one or more occupational groups, associational groups and communities to it…

Unless the context clearly requires otherwise, as used in this chapter:(1) "Affiliate" of an enterprise or organization means a person that controls, is controlled by, or is under common control with, the enterprise or organization. "Control" means twenty-five percent or greater …

(1) General. Each credit union must keep its FOM bylaws substantially in the form of the model FOM bylaws prescribed by the division. Credit unions that have not converted to the model FOM bylaws prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter) …

(1) In order to request the approval of the director to add an FOM group to its bylaws under WAC 208-472-020 (2)(b) or (3), a credit union must submit a written application in duplicate to the director. The application must include the following items, and any other information a…

A credit union may not conduct direct marketing targeted primarily at the persons in an occupational or associational group unless:(1) The group was included in the FOM bylaws of the credit union prior to . . . . . . . . (the effective date of the 2002 revisions to this chapter).…

(1) This chapter also applies to the conversion of an out-of-state, foreign or federal credit union to a credit union chartered and operating under chapter 31.12 RCW.(2) This chapter does not apply to mergers where the continuing credit union is organized (or chartered) and opera…

Why do credit unions need a rule on the handling of "other real estate owned" (OREO), property legally owned by the credit union as the result of foreclosure, or acquired as the result of default on a loan collateralized by real property? Although most financial institutions that…

What is DFI's rule-making authority for these OREO rules? The division of credit unions is delegated rule-making authority by the director of DFI. The director's rule-making authority is based upon the Washington Credit Union Act (WCUA), RCW 31.12.516(2), which allows the directo…

What legal authority does DFI have to require special reports from credit unions, accounting for OREO? The director has the statutory authority to require a credit union to file any financial or statistical report the director may require. The director, therefore, has the authori…

What is the legal authority for a credit union to acquire, hold and dispose of OREO? A Washington state chartered credit union is permitted to own foreclosed and other OREO property, based on its statutory power to make secured and unsecured loans to its members. RCW 31.12.426(1)…

For purposes of these rules, the following definitions apply:"Appraisal" means a written report by a certified or licensed appraiser containing sufficient information to support the credit union's evaluation of OREO, taking into consideration market value, analyzing appropriate d…

How long is a credit union allowed to hold OREO? OREO must be disposed of as soon as prudent business judgment dictates, and in no case longer than five years, absent special circumstances and discretionary approval by the director. The longer real estate is held, the more specul…

What accounting and reporting procedures are credit unions required to follow when accounting for OREO? Accounting and reporting for OREO must comply with GAAP. GAAP applies to accounting and reporting for OREO, regardless of materiality.Where can GAAP be accessed and researched?…

(1) What basic standards are used to determine the initial and ongoing regulatory acceptability of holding OREO? Holding requirements include, at a minimum, compliance with the following:(a) Accurate accounting for OREO. Refer to the accounting section of this rule at WAC 208-476…

These rules are designed to help Washington state-chartered credit unions establish, reiterate, integrate and maintain their own policies and procedures regarding subprime and nontraditional mortgage lending guidance. These policies and procedures are required by chapter 108, Law…

Because of concerns about problems with subprime mortgage lending, the federal government issued the Interagency Guidance on Nontraditional Mortgage Product Risks and a Statement on Subprime Mortgage Lending (collectively, "the guidance"). In 2007, governor Christine Gregoire con…

The stated intent of the guidance is to help borrowers to better understand adjustable rate mortgage (ARM) risks. The guidance requires credit unions and other financial institutions to have "policies and procedures" that focus on the various risks of subprime/nontraditional mort…

Yes, the guidance requires all financial institutions, including credit unions, to focus on the following subjects and apply the relevant ones to their existing policies and procedures:• Help borrowers understand ARM risks, including:– Low initial payment;– High or unlimited rese…

You can find the two federal guidance documents on the internet: http://www.fdic.gov/news/news/press/2006/pr06086b.pdf; and http://www.fdic.gov/news/news/press/2007/pr07055a.html.You can also click on the links on the DFI website at www.dfi.wa.gov.If you do not have internet acce…

The federal guidance consists of two lengthy documents that are very detailed. Because they are required by state statutory law, they apply in their entirety. DCU cannot merely summarize them or give you a checklist. You must read the documents in order to apply the relevant prov…

Every state-chartered credit union is different. There is no one-size-fits-all guidance available. DCU will not issue model guidance, because the process of self-analysis that a credit union needs to do, in order to develop its own guidance policies and procedures, is beneficial.…

(1) "Bank" means a commercial bank chartered and regulated under Title 30A RCW, a mutual or stock savings bank chartered and regulated under Title 32 RCW, or a savings association chartered under the provisions of Title 33 RCW.(2) "Community Reinvestment Act" as defined in this c…

(1) In determining whether an asset of a bank is bankable, all of the circumstances of the asset shall be weighed including, but not limited to, the following:(a) Character of the borrower;(b) Capacity of the borrower;(c) Capital of the borrower;(d) Sufficiency of the collateral;…

The purchase or sale of investment securities under an agreement to resell or repurchase the interest transferred, or a portion thereof, at the end of a stated period, does not constitute an obligation subject to the lending limits under RCW 30A.04.111 and chapter 208-512A WAC an…

Subject to the Federal Reserve Board's Regulation R, 12 C.F.R. Part 218, a bank may purchase and sell investment securities upon the order and for the account of its customers and may deal in the underwriting and purchasing of investment securities for the bank's investment accou…

(1) A bank may lease part of the premises in which it conducts its day-to-day business to persons engaged in nonbanking business activities subject to the following limitations:(a) No director, officer, or employee of such bank may have any direct or indirect financial interest e…

(1) Permissible investments include the following investment security types, subject to specific capital limitations:(a) Type I security, which a bank may deal in, purchase, and sell for its own account without any capital and surplus limitation.(b) Type II security, which a bank…