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.
One of the unsung benefits of participation loans is that the participated portion of the loan doesn't count towards the 12.
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.
In the current lending environment when loans are hard to generate, there's an uptick in interest in member loans and nonmember participation loans, especially from credit unions in the $100 million to $250 million asset range, said Bill Beardsley, president of Michigan Business Connection LC, a CUSO in Ann Arbor that manages over $200 million in business loans for more than two dozen credit unions.
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.
30, 2001, the administration had purchased 7,132 loans under the 1997 program (including 1,220 participation loans funded from both the 1997 and 1980 bond programs) with an aggregate principal balance of $632 million.
Determining if a credit union wants to be the originator or buyer of participation loans also requires a certain level of expertise, Middleman said.
As of June 30, 2001, the administration had purchased 6,846 loans under the 1997 program (including 1,153 participation loans funded from both the 1997 and 1980 bond programs) with an aggregate principal balance of $605.
In 2006 and 2007, the credit union was fast approaching its member business lending cap and opted to enter into participation loans to continue meeting what had become a growing demand from the community.
As of March 31, 2001, the administration had purchased 6,507 loans under the 1997 program (including 1,102 participation loans funded from both the 1997 and 1980 bond programs) with an aggregate principal balance of $574.