Credit union and bank commercial mortgages, compared

Sponsors compare a credit union with a bank because both can hold a commercial mortgage on their own books and both can move faster than a conduit on a smaller building. The legal difference is membership and the rulebook. Title 12 of the United States Code, section 1759, limits federal credit union membership to a single common bond, a multiple common bond, or a well-defined local community. A member subscribes to at least one share, and the credit union may charge a uniform entrance fee. A borrower who is not in that field of membership is not a member. A bank borrower does not join the bank under that statute. This note is about commercial income property. It is not a consumer loan and not a one-to-four-family dwelling product. This note is general information. It is not tax advice, not legal advice, and not an environmental or engineering opinion. A CPA, an attorney, or the licensed professional named in the report decides how the rule applies to a given property.

NCUA's commercial lending rule is 12 CFR Part 723. Section 723.8 sets an aggregate limit on the credit union's net member business loans: the lesser of 1.75 times actual net worth, or 1.75 times the minimum net worth required to be well capitalized under 12 U.S.C. 1790d(c)(1)(A). That is a cap on the credit union's book, not a maximum proceeds figure for your building. Loans fully secured by a lien on a one-to-four-family dwelling are not member business loans for that aggregate cap. They are mentioned here only so this commercial page is not confused with that exclusion. The rest of this note is income-producing commercial property.

Participations, exemptions, and what a bank does instead

Section 723.8 also addresses nonmember commercial loans and participations, including arrangements that would evade the aggregate cap by trading paper. A participation can let a credit union share a loan that is larger than it wants to hold alone. It does not turn the credit union into a bank, and it does not remove the membership question on the portion the credit union keeps for a member. Some credit unions are exempt from the aggregate cap, including low-income credit unions and others the rule names, such as community development financial institutions and credit unions with a history of member business lending that the regulation exempts. Whether a given credit union is exempt is a fact about that charter, not a guess this page will make.

A bank is not under Part 723. Its commercial real estate limits come from its own regulators and its own credit policy. Banks often expect a deposit relationship. Credit unions often expect membership and, sometimes, a share account. Those are tendencies you should confirm with the institution, not quotas this note prints. Arizona pages that already discuss the local desks, and that this note does not copy, are Arizona credit unions, Arizona banks, and community versus regional banks. The wider comparison is lender types.

What Capital Market Funds is in this comparison

The firm arranges commercial mortgages. It does not take deposits, does not sell shares, and does not hold the member business loan. If a credit union is the right lender, the borrower still has to be a member or the loan has to be structured, such as by participation, in a way that credit union's counsel accepts. If a bank is the right lender, membership is irrelevant and the bank's credit box is the test. We can introduce either conversation. We cannot join the credit union for you.

The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker and NMLS 1445066. Calling this office does not open a share account and does not approve a loan.