---
kind: "section"
citation: "12 C.F.R. § 704.7"
title: "12"
number: "704.7"
heading: "Lending."
url: "https://uscodex.org/cfr/12/704.7"
---

# §704.7. Lending.

- (a) **Policies.** A corporate credit union must operate according to a lending policy which addresses, at a minimum:
  - (1) Loan types and limits;
  - (2) Required documentation and collateral; and
  - (3) **Analysis and monitoring standards.**
- (b) **General.** Each loan or line of credit limit will be determined after analyzing the financial and operational soundness of the borrower and the ability of the borrower to repay the loan.
- (c) **Loans to members—**
  - (1) **Credit unions.**
    - (i) The maximum aggregate amount in unsecured loans and lines of credit from a corporate credit union to any one member credit union, excluding CLF-related bridge loans and pass-through and guaranteed loans from the CLF and the NCUSIF, must not exceed 50 percent of the corporate credit union's total capital.
    - (ii) The maximum aggregate amount in secured loans (excluding those secured by shares or marketable securities and member reverse repurchase transactions) and unsecured loans (excluding pass-through and guaranteed loans from the CLF and the NCUSIF) and lines of credit from a corporate credit union to any one member credit union must not exceed 150 percent of the corporate credit union's total capital.
  - (2) **CUSOs.** Any loan or line of credit from a corporate credit union to a CUSO must comply with [§ 704.11](/cfr/12/704.11.md).
  - (3) **Other members.** The maximum aggregate amount of loans and lines of credit from a corporate credit union to any other one member must not exceed 15 percent of the corporate credit union's total capital plus pledged shares.
- (d) **Loans to nonmembers—**
  - (1) **Credit unions.** A loan to a nonmember credit union, other than through a loan participation with another corporate credit union or a CLF-related bridge loan, is only permissible if the loan is for an overdraft related to the providing of correspondent services pursuant to [§ 704.12](/cfr/12/704.12.md). Generally, such a loan will have a maturity of one business day.
  - (2) **CUSOs.** Any loan or line of credit must comply with [§ 704.11](/cfr/12/704.11.md).
- (e) **Member business loan rule.** Loans, lines of credit and letters of credit to:
  - (1) Member credit unions are exempt from [part 723](/cfr/12/part723.md) of this chapter;
  - (2) **CUSOs are not subject to part 723 of this chapter.**
  - (3) Other members not excluded under [§ 723.1(b)](/cfr/12/723.1.md?p=b) of this chapter must comply with [part 723](/cfr/12/part723.md) of this chapter unless the loan or line of credit is fully guaranteed by a credit union or fully secured by U.S. Treasury or agency securities. Those guaranteed and secured loans must comply with the aggregate limits of [§ 723.8](/cfr/12/723.8.md) but are exempt from the other requirements of [part 723](/cfr/12/part723.md).
- (f) **Participation loans with other corporate credit unions.** A corporate credit union is permitted to participate in a loan with another corporate credit union provided the corporate retains an interest of at least 5 percent of the face amount of the loan and a master participation loan agreement is in place before the purchase or the sale of a participation. A participating corporate credit union must exercise the same due diligence as if it were the originating corporate credit union.
- (g) **Prepayment penalties.** If provided for in the loan contract, a corporate credit union is authorized to assess prepayment penalties on loans.

## Notes

### Amendments

[62 FR 12938, Mar. 19, 1997, as amended at 64 FR 57365, Oct. 25, 1999; 67 FR 65655, Oct. 25, 2002; 68 FR 56550, Oct. 1, 2003; 75 FR 34621, June 18, 2010; 80 FR 25938, May 6, 2015; 80 FR 57284, Sept. 23, 2015; 85 FR 71826, Nov. 12, 2020]

### Authority

Authority: 12 U.S.C. 1766(a), 1781, 1789.

### Source

Source: 62 FR 12938, Mar. 19, 1997, unless otherwise noted.

### Amendments

[62 FR 12938, Mar. 19, 1997, as amended at 64 FR 57365, Oct. 25, 1999; 67 FR 65655, Oct. 25, 2002; 68 FR 56550, Oct. 1, 2003; 75 FR 34621, June 18, 2010; 80 FR 25938, May 6, 2015; 80 FR 57284, Sept. 23, 2015; 85 FR 71826, Nov. 12, 2020]