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NCUA Approves Loan Participation Rule

Mon, Jul 1, 2013

Columbia, Maryland

The NCUA's amended and long-awaited loan participation rule was approved Thursday, June 20, at the National Credit Union Administration (NCUA) board meeting.

The final rule on loan participations limits loans from one originator of 100% of a credit union's net worth.

This is an increase from the proposed 25% of net worth cap. An expanded waiver process has been approved for the single-originator limit and limits to one borrower.

The rule requires credit unions to adopt a loan participation policy, use specific loan participation agreements, and provide for the ongoing monitoring of the loan participation.

The Loan Participation Policy must:

  • Establish underwriting standards for loan participations.
  • Establish a limit on the aggregate amount of loan participations that may be purchased from any one originating lender, not to exceed the greater of $5,000,000 or 100 percent of the federally insured credit union's net worth, unless this amount is waived by the appropriate regional director, and, in the case of a federally insured, state-chartered credit union, with prior written concurrence of the appropriate state supervisory authority.
  • Establish limits on the amount of loan participations that may be purchased by each loan type, not to exceed a specified percentage of the federally insured credit union's net worth.
  • Establish a limit on the aggregate amount of loan participations that may be purchased with respect to a single borrower, or group of associated borrowers, not to exceed 15 percent of the federally insured credit union's net worth, unless waived by the appropriate regional director, and, in the case of a federally insured, state-chartered credit union, with prior written concurrence of the appropriate state supervisory authority.