I want to address the issue of loan participations. My clientshave expressed a keen interest in loan participations. Withbasically no return on overnight funds and the loan demand from themembers a little soft, some credit unions that have loans to sellthrough loan participations are helping the yield of other creditunions so long as the transaction is properly structured and asmany protections are in place as possible.

The NCUA is placing more and more emphasis on “regulatorycontrol” of loan participations. Chairman Debbie Matz has recentlypublicly stated that NCUA will be crafting “enhanced” regulationsso that all credit unions involved in loan participations will havesome “skin in the game.” In fact, the entire front page of the NCUAReport for October 2011 was devoted to NCUA's increased attentionto loan participations.

NCUA will be increasing the requirements regarding due diligencefor all loan participations. They will be requiring credit unionsto undertake more thorough and comprehensive reviews before, duringand throughout the life of the loan participation. There are anumber of key topics that I would like to bring to your attentionat this time so as you contemplate loan participations, you may bebetter protected and most certainly better prepared.