Credit Union Loan Participation Agreement

Below, several of the most important issues that are often overlooked or not fully verified by EU credit sales managers when entering into a commercial credit transaction are listed: Section 701.22 (b) (5) of the NCUA rules, which examine loan participation, require you to establish a written credit participation policy. The directive should include credit insurance standards and due diligence expectations tailored to your level of risk comfort. This means that you, not the original Credit Union, should set acceptable credit standards, guarantee requirements, types of credits, documentary expectations, service agreements and aggregate guarantee agreements, and single-Borrower participation limits. Loan file. As basic as it may seem, credit files sent to credit unions are often missing from key documents or contain unsigned credit documents. The Purchasing Credit Union must always be sure that it has signed copies of all credit documents. Yes, yes. If you sell a credit interest held by the credit union, the amount of interest to participate in the credit can be withdrawn from the amount that is included in your regulatory limit if the sale is without recourse and fulfills a true sale processing in accordance with the GAAP. Note that when a CUSO is the originator of a loan and sells the credit stake to a credit union, the true sales analysis is not a problem and only the amount of interest earned is charged on the ceiling.

(ii) there is significant financial interdependence between borrowers or borrowers. Significant financial interdependence means that 50% or more of a borrower`s gross or gross expenses (on an annual basis) are deducted from transactions with another borrower. Gross revenues and expenses include gross receipts or expenses, intercompany loans, dividends, capital contributions and similar revenues or payments; or no Phase I environmental inspection required: if the loan is secured by real estate, a Phase I environmental inspection should normally be required. This is especially important when the real estate guarantee is a production/production facility or a gas station. (i) prior to the purchase, the identification of specific credit interests acquired either directly in the agreement or through a document included in the reference agreement; (i) setting insurance standards for loan participation; The board of directors or the investment committee of the purchasing credit union must accept the acquisition of a shareholding in the credit. This is a requirement of the regulation, so even if there is a delegation of lending authority to certain staff members, the board of directors or the investment committee must ratify the authorization. If there was an unauthorized authority to authorize it, it would undoubtedly lead to an RRO for future loans, but the purchase of credit would remain effective for all parties to the sale of equity in the loan. 3. The original lender reserves to participate in each participating loan. If the original lender is a federal credit union, the withheld interest rate must be at least 10 per cent of the remaining loan balance for the term of the loan.

Where the original lender is another type of eligible organization, the interest withheld must be at least 5% of the remaining balance of the loan during the term of the loan, unless a higher percentage is required by current state law; Which organizations have the right to lend to credit unions? Yes, yes.