441-720-0230 Adoption of Federal Statutes and Regulations Concerning Loan Participations (1) Federal Tie-In: A state credit union is authorized to participate in making loans with financial institutions as defined in ORS 706.008 within the limitations of the board of directors’ written participation loan policies, provided: (a) No credit union may obtain an interest in a participation loan if the sum of that interest and any indebtedness owed to the credit union by the borrower exceeds 10 per cent of the credit union’s unimpaired capital and surplus; (b) A written master participation agreement is properly executed, acted upon by the credit union’s board of directors, or if the board has so delegated in its policy, by the investment committee or senior management official(s) and retained in the credit union’s office. The master agreement must include provisions for identifying, either through a document that is incorporated by reference into the master agreement, or directly in the master agreement, the participation loan or loans prior to their sale; and (c) A credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest. (2) An originating lender which is a state credit union must: (a) Originate loans only to its members; (b) Retain an interest of at least 10 per cent of the face amount of each loan; (c) Retain the original or copies of the loan documents; and (d) Require the credit committee or loan officer to use the same underwriting standards for participation loans used for loans that are not being sold in a participation agreement unless there is a participation agreement in place prior to the disbursement of the loan. Where a participation agreement is in place prior to disbursement, either the credit union’s loan policies or the participation agreement shall address any variance from non-participation loan underwriting standards. (3) A participant state credit union that is not an originating lender must: (a) Participate only in loans it is empowered to grant, having a participation policy in place that sets forth the loan underwriting standards prior to entering into a participation agreement; (b) Participate in participation loans only if made to its own members or members of another participating credit union; (c) Retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement; and (d) Obtain the approval of the board of directors or investment committee of the disbursement of proceeds to the originating lender. (4) Additional State Requirements: (a) In addition to the requirements of the federal provisions stated in this rule, a state credit union must file with the Director: (A) A representation that the board of directors has adopted written policies and procedures concerning loan participations and recourse; (B) An undertaking that it will not keep or acquire any loan participation interest which exceeds the loan to one borrower requirements in ORS 723.512 and, except for this provision, will follow the guidelines for loan participations stated in this rule; and (C) An undertaking that each loan agreement will contain a provision that provides complete access to the agency to all records of each participant concerning the loan transaction. (b) Any provision of subsection (a) of this section except paragraph (a)(B) of this section may be waived or modified by order of the Director if no undue risk is created by the waiver or modification and the credit union has policies, procedures, and strategies covering the changed items or where it is necessary for regulatory purposes. Statutory/Other Authority: ORS 723.102 Statutes/Other Implemented: ORS 723.156 History: Renumbered from 441-710-0220, FCS 2-2005, f. & cert. ef. 8-25-05 FCS 10-1987, f. 11-13-87, cert. ef. 12-1-87, Renumbered from 805-072-0280