WASHINGTON (9/21/15)--Participation lending is an unfamiliar area for many credit unions, which is why the National Credit Union Administration attempted to shed some light on this practice in a webinar last week. According to a live poll held during the webinar, most of the participating credit unions have never been involved in participation lending.
A loan participation is a single loan funded by multiple lenders through an agreement mapping out the details pertaining to the administration of the loan. Loan types include member business loans, indirect auto loans, residential real estate loans and private student loans.
Nancy DeGrandi, CUNA’s manager for federal compliance information and research, delved deeper into the webinar in CUNA’s CompBlog.
“So what are the benefits of participation lending? Well, for sellers, loan participations offer credit unions a way to manage risks (interest rate, liquidity, credit) and allows the selling credit union to retain and maintain a relationship with the member while sharing the credit risk with other lenders,” DeGrandi writes. “And for buying credit unions, loan participations can benefit your credit union by growing and diversifying loan portfolios as well as increasing revenues.”
CompBlog’s analysis of the webinar includes a breakdown of steps the NCUA suggests for credit unions looking to get involved in loan participation.