Telesis Woes Lead to Loan Participation Scrutiny: Print Preview
- Critics blame deals involving loan brokers.
- NCUA said proposal aims to shelter CUs from systemic risk.
- CUs need to ask harder questions, CUSO CEO urges.
The timing of criticism toward a regulatory proposal to limit loan participations to a certain percentage of a credit union’s net worth with the takeover of a California cooperative heavily steeped in the transactions may have created an ironic overlap.
As of June 2011, 1,401 federally insured credit unions held over $12.4 billion worth of outstanding loan participations, according to NCUA Call Report data. The agency said since 2007, loan participation balances have grown significantly– up 28% over the last four years–in an environment of extreme economic volatility. Federally insured state-chartered credit unions represent 68% of all participations sold and 55% of participations bought.
“FISCUs have consistently reported higher rates of delinquencies and charge-offs on loan participations–which is one reason why the proposal would extend loan participation protections to federally insured state-chartered credit unions,” the NCUA board said.