PLANO, Texas (7/3/13)--Spurred by the passage of a new National Credit Union Administration rule and strengthening loan demand, Catalyst Corporate FCU, Plano, Texas, has introduced a new loan participation program.
Catalyst Corporate's newest service follows NCUA's June 20 approval of a loan participation rule that spells out new limits for credit unions seeking to acquire shared loans.
The final rule set a limit on loans from one originator of 100% of a credit union's net worth. This is an increase from the proposed 25% of net worth cap. The agency also approved an expanded waiver process for the single-originator limit and limits to one borrower. The Credit Union National Association urged such changes and the CUNA board emphasized credit union concerns as it worked to make the rule more practicable (News Now June 27).
The new rule from NCUA, which includes other provisions designed to mitigate risk, sets clear guidelines just as the U.S. economy notches several quarters of loan growth that could heighten the attractiveness of a participation program, Hamilton added. Recently released figures from the NCUA revealed the fastest first-quarter loan growth for federally insured credit unions in five years.
"Loan participations are an effective tool to help credit unions manage their business and their balance sheets," Hamilton said. "They can help offset liquidity challenges and concentration issues, and enable credit unions to meet their members' loan needs without exceeding policy limits or pressuring capital ratios."
Catalyst Corporate acts as facilitator, bringing the buyers and sellers together in the loan participation process, but does not participate in the loans.
Loan packages are comprised of consumer-type loans--auto loans and first mortgages--rather than commercial loans.