The final member business lending (MBL) rule will open doors for credit unions interested in loan participations, says Larry Middleman, president/CEO of CU Business Group.
“Credit unions will have all kinds of latitude in the principles-based regulatory environment from NCUA,” says Middleman, who spoke Monday at the CUNA Lending Council Conference in Las Vegas.
NCUA’s final rule goes into effect Jan. 1, with an important note regarding loan participations. The MBL rule clarifies that nonmember business loan participations will not count against the MBL cap.
An informal survey of session attendees revealed that the credit unions that will buy more participations are those that have the proper infrastructure or are already involved. Middleman notes that credit unions are now getting a shot a large deals.
“We are much more recognized as a player in the industry,” he says. “We have the connections and the expertise.”
Loan participations, with their many moving parts, need to have a system that “nails the processes,” Middleman says.
In creating MBL policies, board and management have to cross-reference a number of areas including industry concentration levels and the economy in the area where the credit union will be participating.
“Geography is worth paying attention to, especially in policies,” he says.
“I’m so impressed with talent base, expertise, and commitment to doing (loan participations) right,” Middleman continues. Successful participations take into account business services, loan origination, underwriting, deposits, and more.
Middleman offers five tips for loan buyers and sellers.
Good loan buyers should:
Stellar loan sellers should:
Read more CUNA News coverage of the CUNA Lending Council Conference.