Rule 80-2-12-.03 - Participation Loans and Whole Loans(1) Credit unions may invest in loans made by other lenders. Credit unions may purchase one hundred percent or less of a loan as part of a participation. Alternatively, credit unions may purchase one hundred percent of a loan as a whole loan. Loans purchased must conform to all laws and regulations applicable to that category of loan to the same extent as if the purchasing credit union had originated the loan itself. Applicable statutory and regulatory requirements, including, but not limited to, collateral documentation requirements, loan to collateral value requirements, and loan limitations must be met. The purchasing credit union shall obtain from the selling lender copies of all pertinent collateral and credit documents or, solely in the case of a loan participation, a summary of information sufficient to conclude that all legal and regulatory requirements have been met.(2) A credit union that purchases a loan has the responsibility of conducting loan underwriting procedures on the loan to determine that it complies with the policies of the credit union and meets the credit union's credit standards.(3) The following additional requirements apply to a participation purchase in pools of loans and, those that are applicable, apply to a whole loan purchase in pools of loans: (a) Loans in the pool or discount line must be specifically identifiable on the records of the selling lender.(b) The participation agreement must call for the participant to share pro rata in losses experienced by the pool.(c) The participation agreement must provide for a periodic, at least quarterly, report by the seller to the purchaser to account for settlement for losses incurred and to provide information on past due status of loans contained in the pool or discount line.(d) Where the purchase exceeds the purchasing credit union's unsecured lending limit, the purchase must be accorded prior written approval from the Board or the Board-approved credit committee.(e) The purchase in the pool must satisfy safety and soundness. In determining whether a participation in a pool of loans is safe and sound, the Department will consider: 1. The credit union's understanding of the selling lender's organization, business model, financial health, and the related risks of the participation;2. The credit union's due diligence in monitoring and protecting against participation risks;3. If contracts between the credit union and the selling lender grants the credit union sufficient control over the seller's actions and provides for replacing an inadequate servicer; and4. Other factors relevant to safety and soundness.(4) Where agreements exist for the seller to repurchase or indemnify loss, participation and whole loan purchases shall be treated as loans to the seller by the purchasing credit union and the amount of the purchase shall be considered to be remaining on the seller's books for the purposes of the seller's loan limitations.(5) The purchasing credit union shall be deemed in compliance with the documentation requirements of this Rule so long as the credit union may electronically access, on demand, the required pertinent documentation required by this Rule.Ga. Comp. R. & Regs. R. 80-2-12-.03
O.C.G.A. §§ 7-1-61, 7-1-650, 7-1-663.
Original Rule entitled "Participation Loans" adopted. F. Aug. 15, 2007; eff. Sept. 4, 2007.Amended: New title "Participation Loans and Whole Loans." F. June 29, 2017; eff. July 19, 2017.Amended: F. July 9, 2019; eff. July 29, 2019.Amended: F. July 7, 2022; eff. July 27, 2022.