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RULE §91.805Loan Participation Investments

(a) A credit union may purchase a participation interest in a loan, where the borrower is neither a member of the credit union or a member of another participating credit union, as permitted by §124.351(a)(8) of the Texas Finance Code, provided the following conditions are satisfied:

  (1) the purchase complies with all regulatory requirements to the same extent as if the credit union had originated the loan;

  (2) the originating lender retains at least 10 percent of the outstanding balance of the loan through the life of the loan;

  (3) the purchase complies with the credit union's investment policy, which, at a minimum, must:

    (A) establish the same degree of independent credit and collateral analysis as if the credit union was the originator; and

    (B) establish commitment limits for aggregate purchased participations, out-of-area participations, and loans originated by individual lead institutions.

  (4) the written loan participation agreement fully describes the lead institution's responsibilities, establishes requirements for obtaining timely borrower credit information, addresses remedies upon default, and outlines dispute resolution procedures.

(b) Financial Reporting. A participation interest in a non-credit union member loan purchased under this section shall be reported in accordance with generally accepted accounting principles.

(c) Other Requirements. A credit union purchasing a loan participation investment must also comply with applicable requirements contained within Part 741 of the National Credit Union Administration Rules and Regulations.

Source Note: The provisions of this §91.805 adopted to be effective August 14, 2000, 25 TexReg 7636; amended to be effective November 11, 2007, 32 TexReg 7923; amended to be effective November 13, 2011, 36 TexReg 7544; amended to be effective November 8, 2015, 40 TexReg 7665

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