How does NCUA look upon Loan Participations?
The NCUA has been conspicuously vocal regarding loan participations. Examiners want to see a participation policy; an agreement for each loan with which you participate; and that you are permitted to underwrite in-house. Additionally they want to see that you retain at least 10% of each loan as an originator or up to 90% as the participant. NCUA understands the strength credit unions derive when they work together, but on-going due diligence is mandatory. The agreement should be written in simple contract form and be easy to comprehend. It needs to define key terminology, types of loans, and basic contractual information. The agreement should include sample participation documents and terms and conditions elaborating on the agreement’s stipulations. The agreement must also outline the servicing and collection responsibilities as well as the fees attached to these obligations. Finally, the agreement should also define the participant’s right to resell or transfer their share of the part
