Guest post written by Catherine Klimek, Senior Counsel with Securian Financial Group
Need help navigating the recent guidance by the NCUA on MFOELs, MFLs, and all things lending?
Not since I took a recent trip to the Boundary Waters Canoe Area Wilderness along the Minnesota-Canadian border have I needed so much gear to navigate my course. Summer gear for daytime, winter gear for nighttime, freeze-dried stew and, of course, a canoe. All crucial to surviving four days of nothing but lakes, trees, bears and moose. Luckily, however, with the right planning, even the wilderness can be quite tranquil.
If you are a credit union that has relied on Multi-Featured Open-end Lending Plans (MFOELs) in the past, and you want to underwrite your loans, you have a decision to make: move to a Multi-Featured Blended Plan (MFL), or start using closed-end notes. But if you are hearing conflicting accounts of the NCUA guidance, you may be feeling like the bear got your food, and you lost the oars to your canoe.
How do you determine which direction to go with your lending? The same way you make any good decision – gather the facts, weigh the advantages and disadvantages, listen to your trusted advisors, and then decide for yourself.
Of course, the facts are the most important thing. How do blended plans work? What exactly did the NCUA say? Do I have to make my members sign a closed-end note every time they need a loan?
The facts are that blended plans are permissible and compliant under Reg Z as long as you deliver the closed-end Fed Box disclosures in a timely manner. The NCUA says so, and so do many lawyers across the industry. Delivering the disclosures correctly is not a daunting task and the timing is the same as a closed-end note. But blended plans don’t have the added logistics of getting the document signed every time.
On the other hand, closed-end notes could be a good fit for you if you already rely on in-branch closings or you can otherwise get the member’s signature every time.
To help your decision, you can review our whitepaper outlining the legal basis regarding the Reg Z timing requirements. And talk to your compliance folks and attorneys.
You don’t have to find yourself running through the woods screaming as you’re chased by a thousand-pound moose. Sticking with the facts and legal analysis will have you gliding peacefully across the tranquil lake into the beautiful sunset.
Catherine Klimek is Senior Counsel with Securian Financial Group and is in charge of compliance for Securian’s Loan Documentation Services area. Securian has offered a blended MFL plan since 2009. Catherine may be reached at email@example.com or 651-665-3285. For more information regarding Securian’s blended plan, visit www.nafcu.org/securian or contact Jackie Philpot at 1-800-452-4521, ext. 54908 or firstname.lastname@example.org.