participation

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Participation

The amount of loan or bond issue taken directly from another direct lender or underwriter.

Participation

A very large loan made by more than one lender to a single borrower. A participation loan exists when the lenders have a legal limit on the maximum amount they may lend.

participation

see EMPLOYEE PARTICIPATION.

participation

The practice of a lead lender selling portions of a loan to other lenders, called participants. It may be done because the loan is larger than the regulatory limits for the lead lender, or because the loan is very attractive but rather risky, so several lenders will pool their efforts and spread the risk.FDIC regulations that went into effect on January 1,2002,dramatically changed the structure and accounting for many participations. Formerly, lead banks could agree to repurchase a bad loan from a participant. As a result, it was easier to sell shares to other banks because the participants had no risk.Today,such a repurchase agreement will cause the transaction to be treated as a loan from the participant to the lead,rather than a sale,with the result that the lead may be in violation of banking regulations regarding loan size.

References in periodicals archive ?
Almost a year to the date since Navy Federal Credit Union launched its commercial participation loan program, the country's largest cooperative said it is ready for changes mandated by an NCUA rule even after the regulator recently extended a compliance deadline.
And like participation loans, the guaranteed portion of the loan doesn't count toward the cap.
Purchasing credit unions also required to document agreements with originators and develop participation loan policies.
While the participation loans with other credit unions were in states such as Colorado, Florida, Illinois, and Texas, Trapani said most of the business loans were in Sierra Point's area.
Indeed, there was a run-up in participation loans from the days when that type of shared financing was easy to buy into, said Larry Middleman, president/CEO of CU Business Group LLC, a Portland, Ore.
As long as the expertise is there, Johnson said he is a big fan of participation loans.
Payments and recoveries on participation loans will be shared pari passu between the third party holder and the trust fund based on the respective percentage interests.
As of June 30, 2003, 7,836 loans (of which 1,394 are participation loans funded from a combination of this and CDA's 1980 bond programs), with an aggregate principal balance of $673.
With all of the shared costs and shared risks that advocates tout in favor of participation loans, Johnson said technically, it puts the credit union away from the borrower, which can be a disadvantage.
Pursuant to policy of the water development board, the general financial assistance program is self-supporting from such revenues but general fund support is necessary for programs for economically distressed areas, state participation loans and agricultural water conservation.
Determining if a credit union wants to be the originator or buyer of participation loans also requires a certain level of expertise, Middleman said.