TITLE 26

BANKS AND BANKING

CHAPTER 21

IDAHO CREDIT UNION ACT

26-2119.  loans. (1) A credit union may make secured and unsecured loans to its members under policies established by the board. A person that is not a member of the credit union may serve as a co-borrower or guarantor on a loan to a member of the credit union. Each loan must be evidenced by records adequate to support enforcement or collection of the loan and any review of the loan by the director.

(2)  A credit union may not extend credit to a director, executive officer, supervisory committee member, or credit committee member unless the extension of credit is made on substantially the same terms as those prevailing at the time for comparable transactions by the credit union with members generally.

(a)  For the purposes of this section, "executive officer" means a person who participates or has authority to participate in policymaking functions of the credit union.

(b)  A director, executive officer, supervisory committee member, or credit committee member may not participate in approving or disbursing a loan in which the director, executive officer, supervisory committee member, or credit committee member has a direct or indirect financial interest.

(c)  This section shall not prohibit any extension of credit made pursuant to a benefit or compensation program adopted by the board of directors that:

(i)   Is widely available to employees of the credit union; and

(ii)  Does not give preference to any director, executive officer, supervisory committee member, or credit committee member over other employees of the credit union.

(3)  A credit union may make loans to another credit union, federal credit union, or out-of-state credit union.

(4)  A credit union may purchase loans made to its members if the credit union’s underwriting policies would have permitted it to originate the loans.

(5)  A credit union may purchase, in whole or in part, within the limitations of the board of directors’ written purchase policies:

(a)  A loan or group of loans of its members from any source, if they are loans the credit union is empowered to grant or the loan or loans are refinanced with the consent of the borrowers within sixty (60) days after they are purchased, so that they are loans it is empowered to grant;

(b)  A loan or group of loans of a liquidating credit union’s individual members from the liquidating credit union;

(c)  Student loans from any source if the purchaser is granting student loans 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 market. A pool must include a substantial portion of the credit union’s members’ loans and must be sold promptly; and

(d)  Real estate-secured loans, from any source, if the purchaser is granting real estate-secured loans 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 mortgage market. A pool must include a substantial portion of the credit union’s members’ loans and must be sold promptly.

(6)  A credit union may sell in whole or in part, to any source, a loan to its members within the limitations of the board of directors’ written sale policies, provided:

(a)  The board of directors or investment committee approves the sale; and

(b)  A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the credit union’s office.

(7)  A credit union may purchase a participation interest in a loan from a credit union, credit union service organization, federally insured financial institution, and any state or federal government agency and its subdivision only if the loan is one the purchasing credit union is empowered to grant and the following additional conditions are satisfied:

(a)  The purchase complies with all requirements to the same extent as if the purchasing credit union had originated the loan;

(b)  The purchasing credit union has executed a written loan participation agreement with the originating lender and the agreement meets the minimum requirements for a loan participation agreement as described in paragraph (g) of this subsection;

(c)  The originating lender retains an interest in each participated loan of at least ten percent (10%) of the outstanding balance of the loan through the life of the loan, unless a higher percentage is required under applicable state law;

(d)  The borrower becomes a member of one of the participating credit unions before the purchasing credit union purchases a participation interest in the loan;

(e)  The purchase complies with the purchasing credit union’s internal written loan participation policy, which, at a minimum, must:

(i)   Establish underwriting standards for loan participations;

(ii)  Establish a limit on the aggregate amount of loan participations that may be purchased from any one (1) originating lender, not to exceed the greater of five million dollars ($5,000,000) or one hundred percent (100%) of the credit union’s net worth, unless this amount is waived by the director;

(iii) Establish limits on the amount of loan participations that may be purchased by each loan type, not to exceed a specified percentage of the credit union’s net worth; and

(iv)  Establish a limit on the aggregate amount of loan participations that may be purchased with respect to a single borrower, or group of associated borrowers, not to exceed fifteen percent (15%) of the credit union’s net worth, unless waived by the director;

(f)  To seek a waiver from any of the limitations in subsection (7) of this section, a credit union must submit a written request to the director with a full and detailed explanation of why it is requesting the waiver. Within forty-five (45) days of receipt of a completed waiver request, including all necessary supporting documentation and, if appropriate, any written concurrence, the director shall provide the credit union a written response. The director’s decision shall be based on safety and soundness and other considerations. A credit union may request the director to reconsider a denied waiver request or to file an appeal under the administrative procedures rules, or both; and

(g)  A loan participation agreement must:

(i)   Be properly executed by authorized representatives of all parties under applicable law;

(ii)  Be properly authorized by the credit union’s board of directors or, if the board has so delegated in its policy, a designated committee or senior management official under the credit union’s bylaws and all applicable law;

(iii) Be retained, either in original or copied form, in the credit union’s office; and

(iv)  Include provisions that, at a minimum, address the following:

1.  Prior to purchase, the identification of the specific loan participation or participations being purchased, either directly in the agreement or through a document that is incorporated by reference into the agreement;

2.  The interest that the originating lender will retain in the loan to be participated through the life of the loan;

3.  The location and custodian for original loan documents;

4.  An explanation of the conditions under which parties to the agreement can gain access to financial and other performance information about a loan, the borrower, and the servicer so the parties can monitor the loan;

5.  An explanation of the duties and responsibilities of the originating lender, servicer, and participants with respect to all aspects of the participation, including servicing, default, foreclosure, collection, and other matters involving the ongoing administration of the loan; and

6.  Circumstances and conditions under which participants may replace the servicer.

(8)  Any real estate-secured loans granted by a nonfederally insured credit union shall comply with the appraisal requirements for federally insured credit unions. The director may require any credit union to obtain an appraisal on any real estate-secured loan whenever the director believes it necessary to address safety and soundness concerns.

(9)  Any officer, director, supervisory committee member, or credit committee member who knowingly permits a loan to be made or participates in a loan to a nonmember of the credit union, unless the loan to the nonmember is otherwise allowed in this chapter or by a rule pursuant to this chapter, shall be primarily liable to the credit union for the amount illegally loaned. The illegality of such loan shall not be a defense in any action by the credit union to recover the amount loaned.

History:

[26-2119, added 2020, ch. 230, sec. 6, p. 674.]