2023 Vermont Statutes › Title 8 - Banking and Insurance › Chapter 222 - Powers › § 32501. Participation loans

§ 32501. Participation loans
(a) Subject to the provisions of this section, a credit union may participate in loans to credit union members jointly with other state or federally chartered credit unions, credit union organizations, or other federally insured financial institutions pursuant to written policies established by the credit union’s governing body. As used in this section, “credit union organization” means any organization established primarily to serve the daily operational needs of its member credit unions. The term does not include trade associations, membership organizations principally composed of credit unions, or corporations or other businesses that principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions.
(b) No credit union shall obtain an interest in a participation loan if the sum of that interest and any other indebtedness owing to the credit union by the borrower exceeds the limitations set forth in this title and in rules adopted by the Commissioner.
(c) The credit union shall execute a written master participation agreement and shall retain the written master agreement in the credit union’s office. The master agreement shall 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.
(d) A credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest.
(e) The credit union originating the loan shall:
(1) Originate loans only to its members.
(2) Retain an interest of at least ten percent in the face amount of the loan.
(3) Retain the original or copies of the loan documents.
(4) Require the credit committee or loan officer to use the same underwriting standards for participation loans as are 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 nonparticipation loan underwriting standards.
(f) A participant credit union that is not the originating lender shall:
(1) participate only in loans it is empowered to grant and shall have a participation policy in place that sets forth the loan underwriting standards prior to entering into a participation agreement;
(2) participate in participation loans only if made to its own members or members of another participating credit union; however, this subdivision shall not apply if the originating lender is a federally insured financial institution that is not a credit union;
(3) retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement; and
(4) obtain the approval of the governing body, such person or persons or such committee authorized by the governing body to act on participation loans, or the investment committee for the disbursement of proceeds to the originating lender in accordance with the credit union’s loan participation policy. (Added 2005, No. 16, § 1, eff. July 1, 2005.)