Building Picture EPB Employees Credit Union
Loan Policy
Phone: (423) 648-3413, Fax: (423) 698-2912, email: epbecu@epbecu.org
Home Services Credit Union Policies Index

The information contained herein is for the Directors, Officers, Employees and Members of EPB Employees Credit Union, 1500 McCallie Avenue, Chattanooga, Tennessee, USA. It is provided as both a convenience and as an off-site backup in case of an emergency. No authorization is given to any other person or entity to use this information in part or in whole.


LOAN POLICY
EPB Employees Credit Union
  1. COMPLIANCE
    1. It is declared policy of this credit union to comply with the letter and intent of all applicable laws of the United States and of the state and regulations promulgated thereunder. This policy is specifically intended to include all facts of the granting of credit and making loans, the handling and processing of credit applications, credit inquiries, information concerning interest rates, credit terms and costs, earnings and penalties on shares and all other requirements of the Federal Consumer Credit Protection Act and associated regulations.

    2. As required by law, membership in this credit union is open only to individuals who are included in the field of membership, as it is defined in the credit union by-laws. No member will be denied any service of this credit union due to discrimination because of race, color, religion, national origin, sex, marital status, or 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 any public assistance program, or the fact that the applicant has, in good faith, exercised any right under the Consumer Protection Act or any similar state law.

    3. 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 requests must be in writing via the appropriate Credit Union loan application form or check endorsement clause. Solely verbal requests will not be honored.

    4. No credit will be extended to any person who has caused the credit union a loss and who has not voluntarily repaid the loss or who is not voluntarily repaying the loss, whether the loss was by bankruptcy or otherwise.

    5. No credit will be extended to any person who does not comply with all requirements and qualifications of The USA Patriot Act, The Treasury Department's Office of Foreign Assets Control, and applicable Credit Union policies.

    6. Loans to Credit Union personnel, Board or Committee members will be underwritten in the same manner as that of the regular membership.

    7. Loan officers are prohibited from approving their own loan(s) or those of their next of kin.

 

  1. TYPES OF LOANS
    1. The following types of loans are available to members:
      1. Visa and MasterCard Credit Cards
      2. Signature/Co-maker
      3. Share Pledged (Credit Union accounts only)
      4. Vehicle Secured (including Auto, Truck, Motorcycle, Recreational Vehicle and Watercraft)
      5. Farm Equipment
      6. Lot (subdivision)
      7. Land (acreage)
      8. Home Equity
      9. First Mortgage

    1. The following types of loans are not available at this time:
      1. Mobile Home
      2. Modular Home
      3. Snow Mobiles
      4. Savings/Certificates on Deposit at Other Financial Institutions
      5. Securities
      6. Construction Only
      7. Construction-Permanent

 

  1. LENDING TERRITORY
    1. Mortgage secured property must be located within the following counties:
      1. Tennessee: Hamilton, Bradley, Marion, Sequatchie, Bledsoe, Rhea
      2. Georgia: Dade, Walker, Catoosa, Whitfield
      3. Alabama: Jackson, Dekalb

    1. Vehicle secured loans must on vehicles titled within any of the 50 states of the United States of America.

    2. Unsecured loans and share pledged loans have no territorial restrictions.

 

  1. LIMITATIONS AND RATES
    1. Loan Amount Limitations:
      1. * Maximum loan amount:
        1. The total maximum dollar amount of all loans to one member from this Credit Union will not exceed $250,000. The only exception that would allow a higher dollar amount is the exclusion of share pledged loans, and only in the case in which pledged shares belong to the borrower.
        2. The total of all fixed-rate mortgage loans with terms in excess of five (5) remaining years cannot exceed 25% of Credit Union assets.
      1. Credit Cards: the minimum credit limit shall be $300, and the maximum credit limit will be $12,500 with no additional Credit Union unsecured loan(s); otherwise, any other unsecured loan amount must be deducted from the approved credit limit of all EPB Employees Credit Union credit cards.

      2. Signature and Co-maker: the minimum new loan amount is $500, the maximum amount is $12,500 less any credit limits of any EPB Employees Credit Union credit cards.

      3. Share pledged loan amounts up to 100% of the share balance on EPB Employees Credit Union share accounts only.

      4. Vehicle secured: 100% of dealer invoice on new vehicles for members with good credit; 100% of trade-in value (plus local and state sales taxes) on used vehicles for members with good credit; otherwise, 95% of trade-in value (plus local and state sales taxes) on new/used vehicles for members with less than favorable credit.

      5. Lot/Land: 80% of the sales price or appraised value, whichever is less. The minimum loan amount is $5,000.

      6. Home Equity: up to 90% of the appraised value less the first mortgage loan balance, if any. The minimum advance amount is $500; the minimum line of credit is $5,000.

      7. First Mortgage: 90% of the sales price or appraised value, whichever is less. The minimum loan amount is $20,000.

      8. Construction-Permanent: up to 80% of the appraised value. The minimum loan amount is $20,000.

    1. Loan Term Limitations:
      1. Term Notes: (no installment payments, balance due upon maturity):
        1. Signature/Co-maker loans can be made for a term of up to 90-days. Up to two like-term renewals are permitted.
        2. Share pledged loans are usually made for 90-day terms, but can be made up to a 180-day term. Multiple like-term renewals are permitted on share pledged loans.
      1. Installment Loans: Maximum terms are:
        1. Credit Cards: open-ended, must pay at least 5% of balance per month.
        2. Signature/Co-maker: 4 years.
        3. Share Pledged: 5 years.
        4. Vehicle: New - 6 years, Used - 5 years, Recreational Vehicle - 8 years.
        5. Lot/Land: 15 years.
        6. Home Equity: 10 years.
        7. First Mortgage: 30 years.

    1. Interest Rates:
      1. Loan rates will be adjusted periodically by the Board of Directors.
      2. Tiered rates are available for shorter-term loans.
      3. The Share Pledged Loan rate is set by the Board of Directors. Basically this is a flat rate that will be charged on all loans secured by non-certificate share deposits. For share certificate collateral, the rate is 2% above the certificate rate, provided the loan rate is equal to or more than the basic flat rate approved by the Board. If two or more accounts are pledged, the loan rate will be 2% above the highest rate of the accounts being pledged.
      4. The Home Equity Loan interest rate adjusts annually on January 1st based on the Wall Street Journal prime rate quoted on December 21st, or the last business day before December 21st should that day fall on a weekend, plus a margin of 1.25 percent. There is a floor rate of 8.00%. The Board of Directors may act to lower the Home Equity Loan rate for the calendar year on existing loans due to market or economic conditions.
      5. Any term loan made for $1,000.00 or less cannot have an interest rate in excess of 10.00%. Any term loan $1,000.01 or more is subject to current loan rates.

    1. Interest Rebates:
      1. The Board of Directors will decide which loan types, what percentage rate and when or if any interest rebate will be paid to borrowers.
      2. The loan interest rebate is based on the Credit Union's ability to pay and profit performance for the year.
      3. Any rebate will be paid on the last day of the calendar year. The actual dollar amount per each loan will be deposited into the borrower's Primary Share Savings Account. If the Primary Share account is closed as of the close of business on December 31st, then no loan rebate will be paid.
      4. The rebate is based on a percentage of total interest paid per loan during that calendar year.

 

  1. LOAN DOCUMENTATION
    1. Loan documents will be retained in a loan file folder for each individual. Additional file folders for each loan type can be used if needed.

    2. Closed loan files will be kept in the Credit Union's main office vault when no longer needed for underwriting, approval or closing purposes.

    3. The Credit Union will use CUNA Mutual Group's LOANLINER forms on all loans except credit card and mortgage loans. The Credit Union will use an "in-house" loan application on credit card loans. The Credit Union will use FHLMC/FNMA loan documents on first mortgage real estate secured loans. All documents furnished by title companies will be included in each first mortgage or home equity loan file folder.

    4. The LOANLINER Application and LOANLINER Credit Agreement must be no older than three years.

    5. All new loans or add-ons will have a recent credit report (no older than six months from date of application) at the time of approval.

    6. Evidence of verification of income must be maintained in at least one loan file if multiple loans are involved unless the member is an employee of EPB.

    7. Each loan will have evidence of the monthly debt-to-income ratio calculation.

    8. Secured loans will contain actual security documents (title, security deed, etc., or if a share pledged loan, a hold placed on the deposit account(s)).

    9. Insurance - the Credit Union must be shown as lien holder and the coverage amount must be sufficient to pay the loan should a claim occur:

      1. Hazard insurance coverage on the dwelling must be evident in each mortgage secured file if structure value is used in the appraisal.
      2. Flood insurance coverage on the dwelling must be evident in each mortgage secured file if structure value is used in the appraisal, unless a survey indicates the actual dwelling is not located in the flood area.
      3. Collision insurance must be evident in each vehicle secured file.
      4. ** CUNA Mutual Insurance Company's "Members Choice" Program is available through the Credit Union. It is a member-pay program that is offered to the member for each loan. All terms and conditions are subject to CUNA's program. CUNA's Loan Protection (LP) insurance program will be discontinued April 1, 2005.
      5. CUNA Disability insurance (CDI) is optional and must be requested by and paid by the borrower if such coverage is desired.
      6. Title insurance is required on first mortgage loans for the loan amount. A mortgagee's title policy naming the Credit Union is required on first mortgage loans for the loan amount. This must be a standard ALTA policy that is acceptable in the secondary market.

 

  1. LOAN COMMITTEE
    1. The Board of Directors will appoint at least three Credit Union members to the Loan Committee.
    2. Duties:
      1. The Loan Committee will give final approval/disapproval on any loan that the Loan Officer has recommended or submitted for such action.
      2. The Loan Committee will recommend to the Board any additions, deletions or changes to the types of loans being offered to the membership.
      3. The Loan Committee will submit a monthly report to the Board on loans approved/disapproved during the month.
      4. The Loan Committee may review at its option any loan files for any reason.
      5. The Loan Committee shall report to the Board any practices, concerns or discrepancies that are in violation of this policy.
      6. The Loan Committee will appoint one or more loan officers.

 

  1. LOAN OFFICERS
    1. The Loan Committee will appoint one or more Loan Officers.

    2. Loan officers shall be duly qualified either through in-house training and/or previous experience.

    3. Loan approval limits are restricted only as outlined in Section V, Paragraph A above.

    4. Loan Officer Duties:

      1. To conduct an initial interview with each applicant to determine the purpose of and qualification for credit.
      2. To collect all documents pertinent to each loan type.
      3. To underwrite all loan applications based on the guidelines, requirements and limitations set forth in this policy.
      4. To approve or disapprove all loan applications based on the underwriting guidelines.
      5. To close, or to have closed, all approved loans within a reasonable period of time from date of application.
      6. To complete the "Denial of Credit" letter on all disapproved loans.
      7. To provide to the Loan Committee loan closed data for monthly reporting to the Board.

 

  1. UNDERWRITING GUIDELINES
    1. Qualified Members in Good Standing.

    2. Credit can only be extended to qualifying members of this Credit Union who are in good standing:
      1. Loans with the Credit Union that are delinquent must be brought current (before or with this new loan).
      2. Deposit accounts that may have a negative balance must be brought to zero or to a positive balance.
      3. Any loans charged off in the past must be voluntarily repaid.

    1. Income.
      1. Evidence of income must be shown in each loan file except for share pledged loans.
      2. Income must be verified either by check stub, verification of employment form, last two years' tax returns or by telephone call to the employer.
      3. Income from overtime must be averaged over the previous 12 months.
      4. Income from commissions must be averaged over the previous 12 months.

    1. Overall Monthly Debt-to-Loan Ratio:
      1. This ratio is computed by taking the proposed principal & interest (P&I) payment, adding it to all remaining loan payments that will be due for at least six more months, and dividing that figure by the borrower's gross income.
      2. The overall monthly debt ratio shall not exceed 50%.
      3. On first mortgage loans, this ratio shall not exceed 40% unless the L/V ratio is 70% or less, but never to exceed 50% regardless of the L/V ratio.
      4. Evidence of the debt-to-loan ratio calculation shall be placed in every loan file.

    1. Credit Reporting:
      1. A credit report will be obtained from the local credit bureau on all loan types.
      2. An existing report may be used with a second loan or add-on loan provided the report is no older than six months.
      3. The loan officer must verify the correct name, social security number, address, employment and credit obligations to those items shown on the loan application.
      4. Beacon Scores: A Beacon Score less than 525 will be sufficient cause for credit denial unless extenuating circumstances are noted. Such acceptable circumstances are: same loan reported more than once, reported loan(s) does not belong to applicant, spouse or family member is paying loan, medical problems due to illness or accident, etc.
      5. Current bankruptcy is sufficient cause for credit denial. A dismissed bankruptcy within the past 7 years is sufficient cause for credit denial. Any bankruptcy that causes or has caused the Credit Union to receive less interest or principal is sufficient cause for credit denial, unless that member has voluntarily repaid all interest/principal due at the time the charge-off occurred.
      6. Outstanding judgements and/or collections will be sufficient cause for credit denial unless these items are satisfied via this loan.

    1. Appraisal Reports:
      1. Appraisal reports are required on all first mortgage and home equity loans.
      2. Appraisals must be made according to the guidelines established in the Credit Union's Appraisal Standards and Appraiser Qualifications Policy.
      3. A report cannot be greater than one year old without being updated by a certified and licensed real estate appraiser.
      4. Appraisals made on an "as is" condition basis are acceptable as long as the house is in a livable condition.

    1. American Invoice Service (AIS) New Car Cost Guide:
      1. For credit worthy members, up to 100% of the dealer invoice, including state and local taxes, warranty, if any, shipping cost and title work shall be added together to establish vehicle value. However, the loan amount cannot exceed the Manufacturer's Suggested Retail Price as shown in the AIS New Car Cost Guide.
      2. For less favorable credit worthy members, up to 95% of the dealer invoice, including state and local taxes, warranty, if any, shipping cost and title work shall be added together to establish vehicle value. However, the loan amount cannot exceed 95% of the Manufacturer's Suggested Retail Price as shown in the AIS New Car Cost Guide.

    1. NADA Used Car Book:
      1. Of the three columns of values listed, the "Trade-in" column will be used to determine value. The Credit Union will accept this value (adjusted appropriately for add-ons and mileage) plus local and state sales taxes.
      2. The loan officer can give credit for add-ons and extras (towing hitches, bed liners, etc.) not listed in the NADA book. Also, a "taken care of" vehicle condition can add value. However, final vehicle value should never exceed the "Retail Value" column amount.

    1. NADA Old Car Book:
      1. The Trade-in value column will be used adjusted by add-ons and mileage.
      2. Local and state sales taxes can be added to this value.

    1. Other Values:
      1. Should a vehicle not be listed in the AIS or NADA books, the loan officer may use similar documentation available from a dealership or other source.
      2. The Trade-in value column will be used adjusted by add-ons and mileage.
      3. Local and state sales taxes can be added to this value.

    1. Mortgage Insurance:

    2. Mortgage insurance must be used on real estate loans in excess of a 90% loan-to-value (L/V) ratio. Mortgage insurance is optional on mortgage loans with less than a 90% L/V should the loan officer feel the loan is too weak without it.

 

  1. ELECTRONIC LOAN APPROVAL
    1. Loan applications/approvals are permissible via telephone and/or fax.
    2. Loan applications/approvals via the Internet are not available at this time.

 

  1. SHARE PLEDGED LOAN EXCEPTION
    1. Loans made to the owner of the pledged share account.
      1. There are no limitations on the debt ratio or credit report requirements.
      2. This loan type is excluded from the debt ratio calculation in the event other types of loans are made to the same member.

      1. Loans made to a non-owner of the pledged share account.
        1. The borrower must meet all the underwriting guidelines to qualify for a share pledged loan when the shares belong to another member.
        2. Loan amount limitations and credit report requirements apply as well.

 

  1. REVIEW AND AUDIT PROCEDURES
    1. After each loan is closed and placed on the Credit Union's computer system, Credit Union management will have each loan file reviewed and compared to the data input to assure that all terms of the loan agree with the computer system.

    2. Evidence of each review will be placed in the loan file.

    3. The external auditor will verify annually with the membership each loan with a balance over $50,000. Audit confirmations will be mailed to a random selection of members with loans under $50,000.

    4. Management will utilize computer loan reports to monitor any changes to existing loans.

 

Approved: 2/20/2003
Revised: 6/26/2003
Revised: 6/23/2004
* Revised: 7/28/2004
** Revised 3/16/2005