Mortgages in another state?

The Federal Credit Union (FCU) Act expressly provides credit unions with the power to make loans to its members, to other credit unions, and to other credit union organizations. NCUA does not prohibit credit unions from considering simultaneous membership and loan applications from non-members as long as the borrower is actually a member when any loans are made. See, NCUA Legal Opinion Letter 94-0424. Nonmembers are allowed to be cosigners or guarantors on loans but cannot be joints or co-applicants, however, if a nonmember is involved in a loan, benefits to a nonmember must be incidental in nature. See, NCUA Legal 0pinion Letter 1995-0616. And they “may participate in loans as long as their involvement does not distort the direct lending relationship between the FCU and the member.” See, NCUA Legal Opinion Letter 2000-0605 . Most of us are familiar with these provisions, but what about loan applications from members who live out of the state where the credit union is located?

There are not any NCUA regulations preventing credit unions from lending to members in another state, however, there may be issues with safety or soundness if a credit union is not equipped to underwrite or perform appropriate due diligence on collateral for a borrower out of state. This would be a risk-based business decision for a credit union to make, based on its own risk appetite and the complexity of its operations.

You may be wondering whether there would be any state law preemption issues. NCUA has issued several legal opinion letters discussing preemption and various state lending laws for federally chartered credit unions. Below is a quote from a footnote to NCUA Legal Opinion Letter 2009-1018:


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