![]() ![]() Individual credit unions are expected to evaluate the originating credit union’s financial condition and loan performance record. This means you, not the originating credit union, should determine acceptable credit standards, collateral requirements, loan types, documentation expectations, servicing arrangements and aggregate- and single-borrower participation limits. The policy must include loan underwriting standards and due diligence expectations tailored to your risk comfort level. Section 701.22(b)(5) of NCUA’s rules, which discusses loan participations, requires you to establish a written loan participation policy. Due diligence begins by thoroughly addressing your loan participation policy, agreements and your risk assessment and monitoring processes. Key Elements of a Sound Loan Participation ProgramĪ loan participation is a loan where one or more eligible organizations share the risk associated with the loan by purchasing a portion of the loan from the originating or lead lender.Īs with all loans, proper and thorough due diligence is critical. For the loan originator, the sale of loan participations can enhance liquidity and provide for increased funding for business and member-focused products and services.īefore beginning a loan participation program, here are the basics every credit union needs to understand. ![]() ![]() A properly managed and risk-focused loan participation program can increase asset yields, improve earnings, generate additional loan growth, reduce risk by diversifying the loan portfolio and assist with balance sheet management. ![]()
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