I want to address the issue of loan participations. My clients have expressed a keen interest in loan participations. With basically no return on overnight funds and the loan demand from the members a little soft, some credit unions that have loans to sell through loan participations are helping the yield of other credit unions so long as the transaction is properly structured and as many protections are in place as possible.

The NCUA is placing more and more emphasis on "regulatory control" of loan participations. Chairman Debbie Matz has recently publicly stated that NCUA will be crafting "enhanced" regulations so that all credit unions involved in loan participations will have some "skin in the game." In fact, the entire front page of the NCUA Report for October 2011 was devoted to NCUA's increased attention to loan participations.

NCUA will be increasing the requirements regarding due diligence for all loan participations. They will be requiring credit unions to undertake more thorough and comprehensive reviews before, during and throughout the life of the loan participation. There are a number of key topics that I would like to bring to your attention at this time so as you contemplate loan participations, you may be better protected and most certainly better prepared.