Loan Concentration Limits ::

Loan Concentration Limits

We are currently gathering information on how credit union leaders view loan concentration limits in light of NCUA Letter to Credit Unions 10-CU-03 on Concentration Risk. Please note that this survey is completely anonymous unless you provide identifiable information in your response.

Consider this excerpt from NCUA Letter to Credit Unions 10-CU-03 on Concentration Risk released March 2010:

Examples (of concentration risk) include…: Residential Real Estate Loans – Collateral type, lien position, geographic area, non-traditional terms (such as interest-only, payment option, or balloon payment), fixed or variable interest rates, low or reduced underwriting documentation, and loan-to-value (LTV).

If you are contemplating multifactor concentration limits as described above, consider the following example and how this approach could impact your strategy and business decisions: 8 RE loan types with 4 different LTV ranges for 20 zip codes (geographic areas) and 6 credit score ranges would result in 3,840 new risk limits.

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