FARGO VA FEDERAL CREDIT UNION
POLICY MANUAL
COMPLIANCE - LENDING POLICIES
I. It is the policy of this Credit Union to comply with the letter and intent of all applicable laws of the United States and of the state of North Dakota in all matters related to the granting of loans.
II. No officer or staff member of this Credit Union will, in any manner, discourage a member from submitting an application for credit. This Credit Union will accept and consider a written application from any member who wishes to submit a request for credit.
III. Total loans to an individual will not normally exceed $60,000.
IV. Form of Application
A. The person(s) authorizing loans must inquire as to the loan applicant's ability to repay and credit rating. The information provided by the applicant must, at a minimum, include the following (unless restricted by legislation):
1. Date of application
2. Name(s) of borrower and co-maker
3. Address (street address and mailing if different)
4. Telephone number
5. Social Security number
6. Statement of monthly income and expense
7. Purpose of loan
8. Amount requested
9. Security offered
10. Member signature, attesting information given is correct
B. Proper application form will be from the Loanliner system of CUNA.
V. Special Circumstances
A. Loans to Staff, Board and Committee Members
All loan requests of the Board of Directors, Supervisory Committee members and Credit Union employees will be approved using the following table.
Loans requested by: Approved By: Reported to:
Board of Directors CEO & Loan Officer Board of Directors
Supervisory Committee CEO & Loan Officer Board of Directors
CEO – (See following paragraph) Board of Directors Board of Directors
Credit Union Staff CEO Board of Directors
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· Three out of five Board members will review any CEO loan applications using the CEO Loan Approval Form. A unanimous vote is needed to approve the loan request. If approval is not unanimous, the loan request will be submitted to the full Board for majority approval.
Loan requests in excess of $25,000 must be reported to the Board of Directors. All loan requests of the Board of Directors and Committee members in excess of $20,000 must be approved by the Board of Directors. Loans to other members in excess of $20,000 or aggregate loans in the amount of $20,000 for which directors or committee members are co-signers or guarantors must be sent to the Board of Directors for approval.
B. Conflict of Interest
Loans to employees, officials and family members should be approved by an unrelated person and should not be approved by a subordinate to the applicant. The loan applicant will not engage in the discussion nor participate in the vote, and the minutes will so state. If more than one Board member is involved in matters involving a conflict of interest and a vote is called, the number voting must exceed the quorum requirements for the meeting or unanimous action is required of the voting members.
C. Bankruptcy
1. Loans will not normally be granted to members who have filed bankruptcy for a period of three (3) years following the bankruptcy.
2. The Loan Officer is required to act on all loan requests from applicants with history of bankruptcy within the last 3 years. When such an applicant for a loan is received, the Loan Officer will use extreme caution in his/her decision regarding loan approval.
D. Judgments and Collection Items
The Loan Officer is required to act on all loan applications submitted reflecting unpaid judgments or collection items. The reasons will be documented in the loan file.
E. Special Negotiations
When a member requests lower loan payments, a full assessment of credit worthiness must be completed.
F. Release of Collateral
When release of collateral is requested on a secured loan, the loan must be paid in full. If more than one item is used for collateral and a request is made to release one item, the remaining collateral must be sufficient to cover the unpaid balance in order to release one of the items of collateral.
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G. Faxing Loan Requests
Applications and contracts can be faxed to and from the Credit Union. Original documents with original signature will be sought to complete loan file documentation within 30 days of disbursement of funds.
VI. Basis for loan granting:
A. The member applying for a loan is of responsible character.
B. All loans are made for a specific purpose.
C. The member in question has the ability to repay the loan within the terms of the note.
D. Collateral is required as outlined by the Directors, the Bylaws and statutes which govern this aspect of Credit Union service.
E. All loan policies will prohibit discrimination because of race, color, religion, sex, age, national origin and other factors outlined in federal, state, and local laws. This policy does not affect consideration of factors relating to the ability to repay.
F. The exchange of credit information among credit grantors is a normal trade practice. Credit information about member accounts will normally be provided to the Credit Bureau and its affiliates; however, the exchange of credit information with other credit grantors is not a violation of the oath of office taken by Directors, Committee members and employees of the Credit Union. The provisions of the Fair Credit Reporting Act and regulations of the Federal Credit Union Act will apply.
VII. Loan Officer Duties and Responsibilities
A. Authorized to approve any secured or signature loan application with a gross debt ratio of 42% or less. The Loan Officer and CEO are authorized to approve an application with a gross debt ratio of 43% - 48%.
B. Authorized to release collateral for members who meet established criteria.
VIII. Loan File Checklist
A. Unsecured:
1. Application
2. Note
3. Signature
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B. Secured:
1. Titled Vehicles: (Cars, Trucks, Snowmobiles, Recreational Vehicles, Motorcycles, etc.)
a. Application
b. Note
c. Security Agreement
d. Signature
e. Title or Minnesota Certificate of Lien Release to a Motor Vehicle or UCC-1
f. Evidence of insurance
g. Members are required to purchase full coverage insurance with maximum $1000 deductible on vehicles used as collateral on a loan or loans at the Credit Union. The Credit Union must be listed as lienholder. Proof of such insurance must be received within 30 days following the date of the loan. If insurance is not provided to the Credit Union within 30 days, the Credit Union will purchase an insurance policy to protect its interest in that collateral. The cost of such insurance will be added on to the balance of the loan annually.
h. Payments will be adjusted to ensure repayment of the new loan balance within the originally stated term of the loan.
i. If the Credit Union receives a cancellation of existing insurance, immediate issue of collateral protection will be initiated 30 days from the effective date of cancellation or before, if necessary.
j. Any insurance premium refunded to the Credit Union will be applied to the member's loan balance. The monthly payments will be adjusted to the amount which will ensure repayment within the originally stated term of the loan.
2. Boats:
a. Application
b. Title or UCC-1
c. Note
d. Security Agreement
e. Signature
f. Evidence of insurance
3. Share/Secured
a. Application
b. Note
c. Security Agreement
d. Signature
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C. A credit report will be obtained when the existing credit report is 6 months old. Credit reports used to approve a particular loan will be kept in the loan file as long as the loan is in existence, even if another credit report is obtained for the purpose of the member applying for another loan.
D. Additional Information:
1. UCC-1 are to be filed with the Register of Deeds - good for five years.
2. Open-end lending requires "advance request voucher and security agreement" signed for each cash advance.
3. Truth-in-Lending disclosure is required on all loans.
4. Titled Vehicles - See Attachment A for equity requirements and repayment schedules. Serial number must be listed on the note.
5. Share/Secured - List share account number or certificate number on the note. Requests for secured loans cannot exceed the value of collateral. Any additional funds requested beyond the value of collateral will be considered for approval on a separate loan at the unsecured rate.
6. Income of loan applicants will be verified through appropriate sources. For VA employees, it will be verified (usually by phone) by VA Human Resources Management Service and noted on the application as having been verified. For all other employment income, a current pay stub will be obtained. Child support or alimony income will be verified through legal documents showing the income. Retirement income or pension income will be verified through whatever source the applicant can use to corroborate this information. All such documentation will remain in the file as long as the loan is in existence.
7. To verify income from self-employment or income listed from a business of which the member is an owner/part-owner, the most recent income tax form will be required. A copy of the tax form will be kept in the file and should include the member's signature. The tax return should be scrutinized to determine the source of income; non-recurring (such as capital gains) income should be excluded from the income amount.
IX. Extensions
A. For the purpose of this policy, an extension refers to any authorized skipped payment or extended due date. To request an extension, the member must submit a written justification. When an extension is granted, all interest owed at the date of extension will be paid in full at the time of the next scheduled payment.
B. Only one extension will be granted per loan (does not include loan promotions)
C. Extensions will not exceed 3 months.
D. No additional money will be loaned until terms of the extension are met or payments have
resumed.
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X. Share Secured Loans
Share secured loans will be granted where the shares are held in the Fargo VA Federal Credit Union.
XI. Consolidation Loans
When a consolidation loan is disbursed, cashiers' drafts will be written (free of charge) to pay the debts indicated at the time of application.
XII. Single Payment Loans (Notes)
A. Single payment loans may be granted to members requesting such loans.
B. Single payment loans may not have a due date more than 1 year from the original date of the loan.
C. Extensions on single payment loans - When an extension is requested on a single payment loan, the member will complete the appropriate application and the loan must be set up on monthly payments.
XIII. Unsecured Loan Advances
A. Advances are new money added to an existing loan balance.
B. When an advance is granted there will be no interruption in payment. If the advance causes the payment amount to increase, the difference between the old payment and the new payment will be made within 30 days from date of advance.
C. A complete application may be required at least annually. Express applications will be used to collect updated financial information for advances.
D. There normally will be 120 days between subsequent advances on loans.
XIV. Interest Rate Exceptions
The Credit Union Loan Officer, at his/her discretion, may match an interest rate of a competitor financial institution for our member as long as the member is in good standing and has a credit score above 730.
XV. Loan Exceptions
In cases warranting special consideration, the CEO may approve loans outside this policy. Reasons will be documented in the loan file and reported to the Board of Directors in writing.
ATTACHMENT A
Share secured loans must have a maximum repayment length of no more than 48 months.
Unsecured loans (signature) - Not to exceed $10,000.00 with a Debt Ratio of 48% or under and a maximum repayment length of 48 months. The total unsecured debt to an individual will not exceed $10,000.00. Total unsecured debt refers to the aggregate amount of unsecured loans and our Visa Card.
MAXIMUM REPAYMENT
NEW VEHICLES: (Current year through December 31 or never titled)
100% of retail value - MSRP or purchase agreement plus tax and license 60 months
*If vehicle is greater than $20,000 in value 72 months
*If vehicle is greater than $35,000 in value 84 months
USED VEHICLES:
Six (6) years or newer - 90% of NADA retail value plus tax and license 60 months
Older than 7 years - NADA loan value plus tax and license 48 months
*If vehicle is greater than $20,000 in value 72 months
MOTOR HOMES/RECREATIONAL VEHICLES:
NADA – 90% of retail value or value determined by dealership or manufacturer
plus tax and license 60 months
*If vehicle is greater than $20,000 in value 72 months
*If vehicle is greater than $35,000 in value – must add .25% to interest rate 84 months
INSURANCE COVERAGE (COMPREHENSIVE, LIABILITY, COLLISION)
IS REQUIRED ON ALL ITEMS OFFERED AS COLLATERAL
Approved by the Board of Directors: 7/24/91
Reviewed: 7/03; 3/05; 12/10; 7/12
Revised: 7/92; 7/93; 8/94; 7/95; 7/96; 11/98; 9/99; 5/00; 8/00; 12/00; 10/01; 7/02; 4/05; 9/05; 12/05; 3/07; 7/07; 12/07; 3/09
BOARD OF DIRECTORS
CEO LOAN APPROVAL FORM
DATE OF APPROVAL: _____________________________
DATE OF DENIAL: ________________________________
CEO: _____________________________________________
TYPE OF LOAN: ___________________________________
TYPE OF COLLATERAL: ___________________________
VALUE OF COLLATERAL: _________________________
AMOUNT OF LOAN: _______________________________
DEBT RATIO: _____________________________________
COMMENTS: ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
I am certifying that the information provided is true and correct to the best of my knowledge.
______________________________________, CEO
Signed by Board of Directors
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