Use these policies as a starting point
CONSUMER LENDING POLICIES
In all cases, it is [ENTER ORGANIZATION’S NAME HERE] policy to comply with the all federal and local lending regulations, including [LIST LOCAL REGULATIONS HERE].
All primary borrowers must be in good standing. An individual in good standing is a person who has a savings balance of at least [ENTER AMOUNT] and is not involved in any legal action.
The maximum aggregate indebtedness of any single client shall not exceed XXXXXXX.
Credit may be extended to clients acting as borrower, co-borrower, or co-signer.
Loans will not be made to minors (i.e. Under the age of 18).
Loans to Officials
All loans to officials and immediate family members on which that official or family member serves as endorser, co-borrower, co-signer or guarantor, excluding share loans, must be approved by a majority vote of the board of directors before the loan is closed if the loan produces a total in excess of [ENTER AMOUNT HERE].
A return receipt e-mail vote for approval of official and immediate family member loans is permitted. If the e-mail response is insufficient in obtaining a majority vote a telephone vote is permitted. The loan(s) approved are to be reported at the following board of directors meeting and noted in the meeting minutes.
The term "official" is defined as any member of the board of directors or supervisory committee.
The term "immediate family" is defined as a spouse, children, and/or domestic partners living in the same household.
General Loan Provision
Consumer loans will be made to qualifying clients [ENTER GEOGRAPHIC AREA OR OTHER REQUIREMENTS HERE, IF APPLICABLE] provided adequate protection can be established on the loan security.
The organization will accept any desirable and acceptable collateral as deemed appropriate by a Loan Officer.
The CEO will be responsible for establishing underwriting guidelines.
The maximum cumulative unsecured indebtedness to [ENTER ORGANIZATION’S NAME HERE] of any individual client may not exceed [ENTER AMOUNT].
Direct Consumer Loans Offered
[ENTER ORGANIZATION’S NAME HERE] offers the following types of direct consumer loans [LIST THE LOANS OFFERED AND GENERAL INFORMATION AS DISPLAYED IN THE FOLLOWING EXAMPLE :
Loan maximum cannot exceed 100% of pledged account balance
Personal Line of Credit
Open End Loan – reviewed every 24 months
Closed End Loan
100% Purchase Price or MSRP whichever is less.
Add Tax, Tag, and Title up to 100% of MSRP.
125,000 mileage max
100% Purchase Price or retail value, whichever is less.
Add Tax, Tag, and Title up to 100% of N.A.D.A. retail value.
Adjust for options.
100% of Purch. Price or 100% of retail value, whichever is less
-10 year max
100% of Purchase Price or 100% of published retail value, whichever is less
Purchase order req’d.
No UCC documents required
Loan Underwriting Policy
- The Loan Representative, shall price the proposed collateral to determine its value and adequacy. In cases of auto loans, recreational vehicles, or boats the Loan Representative shall review the sales contract or purchase order to determine if the collateral is acceptable to the organization.
- The designation of Lending Authority shall be conferred by the Board of Directors; all designated Loan Officers have lending authority within the limits prescribed above.
- The Credit Desk Review (CDR), which consists of the CEO and at least one Loan Officer, will be required on all loans that represent a heightened level of credit risk to the credit union. The purpose of the CDR is to ensure the fair and equal treatment of all loan requests. The CDR may only approve loans that are within the maximum debt-to-income ratio. Requests for exceptions must be referred to the Loan Review Committee for action (if necessary).
- The Loan Review Committee, which consists of the CEO and at least one Board member and One Loan Officer, is a source for appeals by individuals who have been denied or offered less advantageous credit terms than were requested. The purpose of the Committee is to ensure the fair and equal treatment of all loan requests. The Committee may override or sustain the decision of the Loan Officer. The Committee may approve loans that exceed the maximum debt-to-income ratio.
- Ultimate authority for the establishing of Loan Policy belongs to the Board of Directors.
- A periodic review of all open-end loans will be performed on a cycle of at least two years.
- A loan set up fee will be assessed at [ENTER AMOUNT].
- No minimum hours are required for full time or part time employees as long as their employer considers them “permanent”. Before applying for a loan, clients must have three consecutive months of stable employment except if they are recent high school or college graduates.
- Summer/ Winter Skip Option, months of January, February, July and August, are permissible on all loans excluding mobile homes.
- Loan Officers may require clients with Non-Standard Files to provide a written explanation of any negative credit history, which could be instrumental in the loan decision.
- An organization employee other than the “approving” lender must disburse the funds to the client.
Business loans to one client, or to more than one client using the same collateral shall not exceed fifteen percent (15%) of the organization's net worth…currently XXXXXXXX.
Board members and senior management personnel (CEO, Director of Operations, and Director of Lending) are prohibited from obtaining a business loan.
The organization will only do client business lending on loans collateralized by real estate. The credit union may do non-client business loan participations secured by taxi medallions in accordance with the loan participation policy.
The length of a business loan will be no more than fifteen (15) years. Loans which are ballooned will be permissible.
The maximum amount that we will invest in secured and unsecured business loans will not exceed 12.25% of total assets.
The maximum amount that we will invest in any given category or type of business loan (i.e. Real Estate or Agriculture) will not exceed 10.00% of Total Assets. The aggregate of both categories will not exceed 12.25%. At this time our limit is XXXXXXX inclusive of all business loan categories.
The Business Loan Committee will consist of the CEO, the Director of Operations, the Director of Lending (“Management”) and a designated member of the Board of Directors. The Committee will meet as needed and requires at least three members to be present of which one member must have two years Business Lending experience. In the absence of a staff member having Business Lending experience, the Committee will utilize the resources of an appropriate Third Party. An approval requires a majority of those present.
Business Lending underwriting guidelines
Business Lending underwriting guidelines comes down to cash flow, loan to value (LTV), credit worthiness and property analysis.
Underwriting Business Lending Cash Flow
Cash flow is paramount to underwriting Business Loans. Within the industry the cashflow analysis is refered to as the Debt Coverage Ratio (DCR). Typically the ratio must be above a 1.20 for non-owner occupied or investment transactions. In other words, for every $1 of mortgage debt the property or business has to have $1.20 of net income to meet the mortgage payments.
The borrower’s personal and business credit worthiness is also important and will be heavily scrutinized. Personal credit scores will be used for all borrowers. D & B's as well as other measures are normally used to assess the creditworthiness of businesses that are involved. The credit union will examine a D & B report if a corporation is involved in the transaction. A UCC search will also be utilized when appropriate.
Property Analysis Commercial Underwriting
Fair market rent and fair market value is heavily measured. Condition, age, appearance, town population, market trends as well as other more property type specifics will be examined.
Business Lending - Loan to Value
Loan to value is simply the value of the subject property vs the loan amount. (i.e if the property is worth XXXX and the loan amount is XXXXXX the LTV is 75%.) The ratio will be no more than 75% on owner occupied and 50% on investment/ non-owner occupied loans.