7/08

NIU EMPLOYEES FEDERAL CREDIT UNION

CONSUMER LENDING POLICY

Statement

It is the policy of the NIU Employees Federal Credit Union to comply with the letter and intent of all applicable laws, and all regulations promulgated there under. This policy is specifically intended to include all facets of the granting of credit and making of loans, the handling and processing of credit applications, credit inquiries, information concerning interest rates, credit terms and costs, and all other requirements of the Federal Consumer Credit Protection Act and associated regulations.

No member will be denied any service of this credit union due to discrimination because of race, color, religion, national origin, sex, marital status, age (provided that the applicant has the capacity to enter into a binding contract), the fact that all or part of the applicant’s income derives from public assistance program, or the fact that the applicant has, in good faith, exercised a right under the Consumer Credit Protection Act or similar state law. No officer or staff member of this credit union will, in any manner, discourage a member from submitting an application for credit. This credit union will accept and consider an application from any member who wishes to submit a request for credit. Such request must be in writing.

Credit Union’s Lending Authority

The Board of Directors grants the President and the Vice President or another designated employee of the credit union authority to make and refuse loans in conformance with the credit union’s overall lending policy. Such lending decisions must observe the credit limits and guidelines stated in the lending policy.

Member loans may carry credit life and/or credit disability insurance that is serviced through CUNA Mutual Insurance Society. Premiums for this insurance may be added to the loan amount requested.

Loan Officer Guidelines

The Board of Directors have approved the following guidelines:

• The President and the Vice President or another designated employee may approve loans up to and including the maximum limits. All vehicle loan requests for an amount greater than the maximum of $50,000 must be approved by the Board of Directors. Home equity lines-of-credit exceeding $100,000 must be approved by a member of the Home Equity Committee.
• The minimum loan amount is $300.
• The maximum home equity line-of-credit is 90% of the appraised value minus the outstanding first mortgage balance.
• The maximum loan on a new vehicle is 100% of the purchase price. A vehicle is considered new if it was purchased new i.e. has never been titled or was purchased new and financed within the last six months.
• The maximum on any used vehicle is 100% of the retail value as quoted by National Buyers Federation, Edmunds and NADA. The middle value of the three car quotes will be used as the loan value.
• Signature loans are available to NIU retirees or NIU status employees (generally those not on probation and who are eligible for vacation and sick benefits) at $2,500 plus one month’s net pay. An additional $1,000 can be added if the cosigner is a homeowner. The maximum signature loan is $6,000.
• If both members of a married couple have signature loans, we do not add on the additional $1,000 to their maximum amount borrowed on an unsecured signature loan.
• Signature loans to initial probationary, trainee, or temporary NIU employees will be based on 50% of one month’s net salary and paid off within a reasonable time period.
• The maximum signature loan to graduate assistants is $500. It must be paid-in-full by the end of the assistantship contract.
• A CD or share secured loan is automatically approved. No debt ratio or income verification is needed.
• Loans exceeding $20,000 to officials (Board members, Supervisory Committee members, and Credit Union staff) must be approved by the Board of Directors.
• Monthly payments on all debts including rent or mortgage should not exceed 50% of the applicant’s and any co-applicant’s net monthly salary.
• If a member discloses in his/her application paying rent, it will be included in the debt ratio even if there is no lease.
• The minimum term for any loan is 12 months. A member may pay a loan off early or make extra payments to reduce the original term as long as regular monthly payments are being made.
• The minimum interest charged for any loan is $5.00.
• All disbursed paid ahead loans must have payment activity at least every 60 days.
• A loan extension agreement may be granted once, per the life of the loan after there is a minimum of 6 months payment history.
• Deferred student loan payments will be taken into consideration when calculating the debt ratio if they are due at any time during the term of the loan.
• A loan may be pre-approved and held for 60 days. The pre-approved rate will be the current rate (or special) on the date of approval.
• A member who has had an account listed as 90 days or more delinquent in the last 12 months will be turned down.
• All collection accounts, charged-off accounts and delinquent accounts 30 days or more (excluding medical collections) listed on the credit bureau must be paid-in full before any money can be loaned. Written proof is required in order to exclude these debts. Proof must be in the form of a statement or account detail from the company.
• If a member is a cosigner for a loan that is delinquent, that debt must be brought current before a new loan is considered.
• Once a member has had a loan application turned down because of a poor credit rating, we will not approve another loan for that applicant until the delinquent debts have been cleared up for 2 years.
• If we incur a loss because of a member’s bankruptcy or any other reason, we will not loan to that member again.
• There will be a $25.00 fee to the member for any loan cancelled 24 hours after being entered into the Bradford-Scott system, the check having been printed, and the borrower having verbally agreed to pick up the check at a pre-arranged date and time.

Loan Officer Responsibilities

The Board of Directors has set the following guidelines for the loan officers. The loan officers will be sure that:

· The member applying for a loan is of responsible character

· All loans are made for a meaningful (provident and productive) purpose

· The member has the ability to repay the loan within the terms of the note or line-of-credit being granted

· The credit application is completed and signed by the member and co-applicant

· A new credit report is obtained on each member and/or co-applicant for each loan request

· A member’s income is reasonably verified and documented with each application upon which the debt-to-income ratio will be criteria for the granting of credit. An annual gross income is calculated and then divided by 12 and multiplied by 78% to reach a net monthly amount

· A debt-to-income ratio is calculated and documented on each loan application where the debt-to-income ratio will be criteria for the granting of credit. Included in this calculation is the member’s new payment if the loan is granted

· The debt-to-income ratio for consumer loans does not exceed 50% of net income

· No member is granted a loan if the credit union has suffered a loss

· No member who has taken bankruptcy is granted a loan until that member has established a clean credit record of 2 years or more and is pledging security for the amount of the loan request. Members who have filed bankruptcy less than two years ago and who have reaffirmed with this credit union and repaid their obligations faithfully may be granted additional secured credit

· No member who has taken bankruptcy in the last five years may be granted an unsecured loan. The exceptions are members who have reaffirmed with the credit union and have repaid their obligations faithfully

· Collateral is required as regulated by the directors, bylaws, and statutes which govern this aspect of credit union service

· All collateral such as titles have a properly recorded lien in the credit union’s name or, where the collateral is other than a titled motor vehicle, a properly recorded lien is filed with the register of deeds

· Funds will be disbursed in accordance with the standard policies to protect the credit union’s lien rights in the case of collateral loans

· The exchange of credit information among credit grantors is a normal trade practice. Credit information about members’ accounts and loans shall normally be provided to the credit bureau and its affiliates. The provisions of the Fair Credit Reporting Act shall apply

· Loans which are 100% share-secured as to the principal are exempt from debt-to-income ratio guidelines. Furthermore, such negative credit rating factors as collections, poor payment history, recent bankruptcy, civil judgments, or collections may be discounted. However, if the credit union has incurred a loss from a previous loan or type of deposit account, the loan may not be granted until the loss has been repaid. If there is evidence of previous fraud or if reasonable grounds exist to believe there is fraudulent intent, the loan is to be denied