Thursday, May 31, 2018

NCUA Opines on Loan Participation Agreements

In a March 22 legal opinion letter, the National Credit Union Administration wrote that certain provisions of the loan participation regulation must be met throughout the life of the transaction.

The letter noted that Section 701.22(d) "emphasizes the need for adequate documentation and due diligence from before the time of purchase throughout the life of the loan."

NCUA further noted that the "loan participation agreement identify each participated loan, enumerate servicing responsibilities for that loan, and include disclosure requirements regarding the ongoing financial condition of that loan, the borrower, and the servicer." The legal opinion letter stated if a loan participation agreement involves multiple loans, the documentation requirement can be met by an addendum or schedule, which identifies each loan and a participant’s interest in that loan.

However, NCUA stated that its "regulation does not prohibit servicing practices that may make administering multiple loan participations more efficient", such as netting payments across multiple performing loans.

Read the legal opinion letter.

1 comment:

  1. Okay as long as they remain in fact "performing" loans individually and not merely collectively. I guess.



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