When done well, loan participations spread income making opportunities to the buyers and provide funds for the sellers to serve more members.
Spreading credit risk across multiple loans and multiple types of loans in disparate geographic areas also tends to be a safer risk strategy. When done poorly, loan participations are like a bad virus that spreads losses to buyers.
While there are a handful of very high profile examples of loan participations done poorly, loan participations have an overwhelming positive effect, especially in this economic climate where a few credit unions with good lending opportunities have loans they can share with credit unions looking for loans.
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