The NCUA has long had a “loan participation” rule that specifies when a credit union can, through a loan participation agreement, purchase an interest in a loan that it did not originate. The rule places limits not only on what type of originators a credit union can do business with, but also what types and concentrations of loans the credit union can become involved in under the loan participation agreement.
In recent years, the NCUA has noticed that loan participations have been a significant factor in the failure of several credit unions. The NCUA has therefore revised the rule to address some of the problem areas that it has found in loan participation agreements and relationships. It also has expanded the rule’s coverage so that all federally insured credit unions are covered, regardless of whether they are federally chartered or state-chartered. The amended rule becomes effective September 23, 2013.
The NCUA has issued a letter to all federally insured credit unions (No. 13-CU-07) with guidance about the new rule and its waiver process. You can find the letter here. (Be sure not only to look at the letter but also to follow the link to the supervisory guidance.)
To learn more about the amendments to NCUA’s loan participation rule, download the complete version of this operations release by logging on to the League’s online compliance manual (http://va.leagueinfosight.com/). Click on the “VACUL Publications & Guidance” subheading, and follow the instructions. If you received this operations release electronically (and if you have your InfoSight log-in information readily available), click here.