12 C.F.R. § 701.23 Purchase, sale, and pledge of eligible obligations.
Title 12 - Banks and Banking
(a) For purposes of this section: (1) Eligible obligation means a loan or group of loans. (2) Student loan means a loan granted to finance the borrower's attendance at an institution of higher education or at a vocational school, which is secured by and on which payment of the outstanding principal and interest has been deferred in accordance with the insurance or guarantee of the Federal Government, of a State government, or any agency of either. (b) Purchase. (1) A Federal credit union may purchase, in whole or in part, within the limitations of the board of directors' written purchase policies: (i) Eligible obligations of its members, from any source, if either: (A) They are loans it is empowered to grant or (B) they are refinanced with the consent of the borrowers, within 60 days after they are purchased, so that they are loans it is empowered to grant; (ii) Eligible obligations of a liquidating credit union's individual members, from the liquidating credit union; (iii) 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; and (iv) Real estate-secured loans, from any source, if the purchaser is granting real estate-secured loans pursuant to §701.21 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 mortage market. A pool must include a substantial portion of the credit union's members' loans and must be sold promptly. (2) A Federal credit union may make purchases in accordance with this paragraph (b), provided: (i) The board of directors or investment committee approves the purchase; (ii) A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the purchasers office; and (iii) For purchases under paragraph (b)(1)(ii) of this section, any advance written approval required by §741.8 of this chapter is obtained before consummation of such purchase. (3) The aggregate of the unpaid balance of eligible obligations purchased under paragraph (b) of this section shall not exceed 5 percent of the unimpaired capital and surplus of the purchaser. The following can be exculded in calculating this 5 percent limitation: (i) Student loans purchased in accordance with paragraph (b)(1)(iii) of this section; (ii) Real estate loans purchased in accordance with paragraph (b)(1)(iv) of this section; (iii) Eligible obligations purchased in accordance with paragraph (b)(1)(i) of this section that are refinanced by the purchaser so that it is a loan it is empowered to grant; (iv) An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the Federal credit union makes the final underwriting decision and the sales or lease contract is assigned to the Federal credit union very soon after it is signed by the member and the dealer or leasing company. (c) Sale. A Federal credit union may sell, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with paragraph (b)(1)(ii) of this section, student loans purchased in accordance with paragraph (b)(1)(iii) of this section, and real estate loans purchased in accordance with paragraph (b)(1)(iv) of this section, within the limitations of the board of directors' written sale policies, Provided: (1) The board of directors or investment committee approves the sale; and (2) A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the seller's office. (d) Pledge. (1) A Federal credit union may pledge, in whole or in part, to any source, eligible obligations of its members, eligible obligations purchased in accordance with paragraph (b)(1)(ii) of this section, student loans purchased in accordance with paragraph (b)(1)(iii) of this section, and real estate loans purchased in accordance with paragraph (b)(1)(iv) of this section, within the limitations of the board of directors' written pledge policies, Provided: (i) The board of directors or investment committee approves the pledge; (ii) Copies of the original loan documents are retained; and (iii) A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations. (2) The pledge agreement shall identify the eligible obligations covered by the agreement. (e) Servicing. A Federal credit union may agree to service any eligible obligation it purchases or sells in whole or in part. (f) 10 Percent limitation. The total indebtedness owing to any Federal credit union by any person, inclusive of retained and reacquired interests, shall not exceed 10 percent of its unimpaired capital and surplus. [44 FR 27071, May 9, 1979, as amended at 46 FR 38680, July 29, 1981. Redesignated at 49 FR 30688, Aug. 1, 1984, and amended at 53 FR 4844, Feb. 18, 1988; 56 FR 15036, Apr. 15, 1991; 56 FR 35811, July 29, 1991; 60 FR 58504, Nov. 28, 1995; 63 FR 70998, Dec. 23, 1998]
Title 12: Banks and Banking
PART 701—ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
§ 701.23 Purchase, sale, and pledge of eligible obligations.
