Maturity limits for loan participations & eligible obligations

With the newest round of economic impact payments hitting members’ accounts, some credit unions are finding that they have too much liquidity and are starting to invest in loan participations or eligible obligations. However, if the credit union is purchasing from banks or CUSOs, the loans may not meet the NCUA maturity limit requirements, so can the credit union proceed with the purchase? Well, it depends.

Loan Participations

Section 701.22(b) states that a credit union may purchase a participation interest in a loan, “if the loan is one the purchasing credit union is empowered to grant” and “the purchase complies with all regulatory requirements to the same extent as if the purchasing federally insured credit union had originated the loan.” The regulation would allow a credit union to purchase a loan participation only if the loans were ones the credit union was empowered to grant, which would restrict the loans to the NCUA maturity limits.

 

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