DEPARTMENT OF LABOR AND ECONOMIC GROWTH

              OFFICE OF FINANCIAL AND INSURANCE SERVICES

                            CREDIT UNIONS


(By authority conferred on the commissioner of the Office  of  Financial  and 
Insurance Services by section 206 of 2003 PA 215, MCL 490.206; 1969  PA  306, 
MCL 24.201 to 24.328; and E.R.O. No. 2003-1)


R 490.1   Rescinded.

  History: 1979 AC; 1981 AACS; 1987 AACS; 1995 AACS; 2005 AACS.


R 490.2   Rescinded.

  History:  1987 AACS; 1995 AACS; 2005 AACS.


R 490.4   Rescinded.

  History: 1995 AACS; 2005 AACS.


R 490.5   Rescinded.

  History: 1979 AC; 1980 AACS; 1987 AACS; 1995 AACS; 2005 AACS.


R 490.6   Rescinded.

  History: 1980 AACS; 1987 AACS; 1995 AACS; 2005 AACS.


R 490.9   Rescinded.

  History: 1980 AACS; 1995 AACS.


R 490.10   Rescinded.

  History: 1980 AACS; 1987 AACS; 1995 AACS; 2005 AACS.


R 490.11  Rescinded.

  History: 1979 AC; 1980 AACS.


R 490.11a   Rescinded.

  History: 1987 AACS; 2005 AACS.


R 490.12   Rescinded.

  History:  1987 AACS; 1995 AACS; 2005 AACS.


R 490.15  Rescinded.

  History: 1979 AC; 1980 AACS.


R 490.15a   Rescinded.

  History:  1987 AACS; 1995 AACS; 2005 AACS.


R 490.16   Rescinded.

  History:  1987 AACS; 1995 AACS; 2005 AACS.


R 490.17   Rescinded.

  History:  1987 AACS; 1995 AACS; 2005 AACS.


R 490.21  Rescinded.

 History: 1980 AACS; 1987 AACS.


R 490.22  Rescinded.

 History: 1980 AACS; 1987 AACS.


R 490.23  Rescinded.

 History: 1980 AACS; 1987 AACS.


R 490.24  Rescinded.

  History: 1979 AC.


R 490.25  Rescinded.

  History: 1979 AC; 1987 AACS.


R 490.31  Rescinded.

 History: 1980 AACS; 1987 AACS.


R 490.41   Rescinded.

 History: 1980 AACS; 1987 AACS; 2005 AACS.


R 490.51   Rescinded.

  History: 1979 AC; 1995 AACS; 2005 AACS.


R 490.52   Rescinded.

  History: 1979 AC; 1987 AACS; 1995 AACS; 2005 AACS.


R 490.81   Rescinded.

  History: 1979 AC; 2005 AACS.


R 490.82   Rescinded.

  History: 1979 AC; 1980 AACS; 2005 AACS.


R 490.94   Rescinded.

  History: 1981 AACS; 1995 AACS; 2005 AACS.


R 490.95   Rescinded.

  History: 1981 AACS; 2005 AACS.


R 490.96   Rescinded.

  History: 1981 AACS; 2005 AACS.


R 490.97   Rescinded.

  History: 1981 AACS; 2005 AACS.


R 490.98   Rescinded.

  History: 1981 AACS; 2005 AACS.


R 490.99   Rescinded.

  History: 1981 AACS; 1995 AACS; 2005 AACS.


R 490.101  Rescinded.

  History: 1981 AACS; 1987 AACS.


R 490.102  Rescinded.

  History: 1981 AACS; 1987 AACS.


R 490.103  Rescinded.


  History: 1981 AACS; 1987 AACS.


R 490.104  Rescinded.

  History: 1981 AACS; 1987 AACS.


R 490.105  Rescinded.

  History: 1981 AACS; 1987 AACS.


R 490.111   Definitions.
  Rule 1.  (1) As used in these rules:
  (a) "Act" means 2003 PA 215, MCL 490.101 to  490.601,  and  any  amendments 
thereto.
(b) "Delinquent loan" means a loan on which the aggregate of payments made is 
less than the aggregate of principal and interest due under the terms of  the 
loan.
  (c) "Obligation" means a loan  or  a  group  of  loans  or  an  installment 
contract or a group  of  installment  contracts  on  which  the  interest  is 
computed on the basis of unpaid balances.
  (d) "Months delinquent" means the number of whole months that have  elapsed 
since a payment or partial payment has become due and  remains  unpaid.   All 
payments or partial payments made  shall  apply  successively  to  the  first 
occurring payment that has become due and remains unpaid.  The original terms 
of the promissory note or extension agreement, including loans in  bankruptcy 
or judgment proceedings, are to be used for the purpose of calculating months 
delinquent.
  (2) Terms defined in the act have the same  meanings  when  used  in  these 
rules.

  History: 2005  AACS.


R 490.112   Corporate credit union; issuance of different classes of  shares; 
priorities upon liquidation; investment  in  interest  rate  risk  management 
instruments.
  Rule 2.  (1) A corporate credit union may issue different classes of shares 
that have different priorities upon liquidation,  provided  the  commissioner 
approves before issue the characteristics of the subordinated shares.  Shares 
subordinated to insured shares and the deposit insurer may  be  considered  a 
form of capital.
  (2) A corporate credit union may, with  prior  approval  of  the  board  of 
directors and consistent with safe and sound business  practices,  invest  in 
interest rate risk management instruments for the sole  purpose  of  managing 
interest rate risk.

  History: 2005  AACS.


R 490.113   Credit  committee  or  board  of  directors  lending    activity; 
recording requirements.
  Rule 3.  The credit committee shall maintain the  minutes  of  all  actions 
taken by the committee with regard to  lending  activity.   If  there  is  no 
credit committee, the board of directors shall maintain the  minutes  of  all 
actions taken by the board with regard to lending activity. The minutes shall 
contain, at a minimum, all of the following items of  business  dealing  with 
lending activity:
  (a) The names of the credit committee or board members in attendance  while 
the credit committee or board is dealing with lending activity.
  (b) Loans and lines  of  credit  approved  or  rejected,  including,  at  a 
minimum, all of the following information:
  (i)   The member's name and account number.
  (ii)  The amount of the proposed loan.
  (iii) Whether the proposed loan is secured or unsecured.
  (iv)  The action taken on the proposed loan.
  (c) A report of actions taken by each loan officer on loan  requests  since 
the last meeting of the credit committee or, if there is no credit committee, 
the board of directors.
  (d) Extension agreements approved or denied.
  (e) Releases of security.

  History: 2005  AACS.


R 490.114   Accounting requirements for investments in mutual funds.
  Rule 4.   A  credit  union  shall  record  each  investment  in  shares  or 
certificates of an open-end management investment company  (mutual  fund)  at 
market value, determined at the end of each month.

  History: 2005  AACS.


R 490.115   Overdrafts.
  Rule 5.  A credit union that  issues  a  check  or  draft  on  a  financial 
institution in excess of the balance of its demand deposit  account  in  that 
institution then shown on the books of the credit union shall  be  considered 
to be operating in an unsafe and unsound manner unless all of  the  following 
conditions are satisfied:
  (a) The excess  is  not  more  than  the  unused  portion  of  the  current 
line-of-credit agreements between the credit union and the institution.
  (b) The line-of-credit agreement expressly provides that it will  apply  to 
cover overdrafts by the credit union.
  (c)  The  board  of  directors  of  the  credit  union  has  approved   the 
line-of-credit agreement.

  History: 2005  AACS.


R 490.116   Delinquent loans.
  Rule 6.  (1) A credit union shall maintain a monthly delinquent loan report 
reflecting all loans that are at least 1 month delinquent.  The report  shall 
contain, at a minimum, all of the following information with respect  to  the 
borrower:
  (a) Name.
  (b) Account number.
  (c) Loan balance.
  (d) Number of months delinquent.
  (e) Any other information determined necessary by the board of directors to 
determine the condition of the loan.
  (2) The application of proceeds from  a  liquidation  of  collateral  to  a 
delinquent loan by a credit union shall reduce the balance due, but  not  the 
months delinquent, of that loan.

  History: 2005  AACS.


R 490.117   Minimum required allowance for loan and lease loss.
  Rule 7.  (1) A credit union shall maintain an allowance for loan and  lease 
loss account at an amount at least equal to  the  credit  union's  reasonably 
foreseeable loan and lease losses, which shall be calculated pursuant to  all 
of the following provisions:
  (a) Management shall make a realistic appraisal of  the  collectability  of 
delinquent loans and leases, known bankruptcies, judgment accounts, and other 
loans and leases for which collectability  is  questionable.   The  resulting 
estimated loss represents the appraisal component of the allowance  for  loan 
and lease loss account.  The total dollar amount of these loans and leases is 
subtracted from the total loan and lease amount  before  calculation  of  the 
experience component of the allowance for loan and lease loss account.
  (b) The experience component is calculated as follows:  The average of  net 
loan and lease losses for the previous 5 years  shall  be  calculated.   This 
"experience" ratio shall be applied to the estimated  total  loan  and  lease 
balance to calculate the estimated loss  in  the  remaining  loan  and  lease 
portfolio.  The average net loan and lease loss ratio  shall  be  updated  at 
each year end.
  (c) The amount calculated that is based on the experience  component  shall 
be added to the estimated loss calculated that  is  based  on  the  appraisal 
component to calculate the minimum amount the credit union shall maintain  in 
the allowance for loan and lease loss account.
  (2) Any deviation in the allowance for loan and lease loss calculated under 
subrule (1) of this rule shall  be  in  compliance  with  generally  accepted 
accounting principles and  supported  in  writing  by  the  certified  public 
accountant or other professionally qualified  individual  who  performed  the 
most recent audit of the credit union.
  (3) The credit union shall maintain documentation to support the balance in 
the allowance for loan and lease loss account as determined in  subrules  (1) 
or (2) of this rule. The credit union shall  evaluate  the  adequacy  of  the 
allowance for loan and lease loss account at least quarterly.
  (4) No loan may be charged to the allowance for loan and lease loss account 
without approval by the board of directors.  The board minutes  shall  record 
the name, account number, and amount of each loan charged  to  the  allowance 
for loan and lease loss account pursuant to section 386(2) of  the  act,  MCL 
490.386(2).

  History: 2005  AACS.


R 490.118   Access to records.
  Rule 8.  A credit union may not purchase or receive recordkeeping  services 
from an outside party unless both the credit union  and  the  outside  party, 
including any subcontractor, furnish the commissioner with  an  assurance  in 
writing that the performance of these services will be subject to examination 
and regulation to the same extent as if the services were  performed  by  the 
credit union on its own premises. 

  History: 2005  AACS.