Rep. Ed Royce (R-Calif.) of the House Financial Services Committee introduced legislation last week that would exempt loans for certain smaller apartment buildings from the member business lending cap, providing relief to credit unions.
H.R. 4226—or the Credit Union Residential Loan Parity Act—is co-sponsored by Rep. Jared Huffman (D-Calif.). It has the support of both the Credit Union National Association and the National Association of Federal Credit Unions.
Currently, credit union MBLs are capped at 12.25 percent of assets. The legislation would eliminate loans from the calculation of the MBL for the purchase of small, one- to four-unit apartment buildings that are not occupied by the owner, ultimately raising the MBL to 27.5 percent of assets, according to NAFCU.
Additionally, the National Credit Union Administration is authorized under the bill to apply strict underwriting and servicing standards to the loans.
“When a bank makes a loan to finance the purchase of a small apartment building it is called a residential real estate loan,” Royce said, pointing to differences between how credit unions and banks account for certain types of loans. “When a credit union makes the same loan it is called a business loan.”
Royce said the legislation would allow credit unions to provide an additional $11 billion in small business loans and would free up “much needed private sector financing for commercial businesses and rental housing without costing taxpayers a dime.”