The revised loan participation rule was one of the topicsdiscussed at the Regional CUSO Alliance meeting last week inCincinnati.

Together, the group represents 15 regional business lendingCUSOs, 508 credit unions and an aggregate loan portfolio of $3billion, according to the alliance.

At its June 20 meeting, the NCUA Board approved several revisions to the loan participationrule, including limiting purchasing credit unions to asingle-originator concentration of $5 million or 100% of net worth,whichever is greater.

The NCUA also approved a change that allows federally insuredcredit unions to establish different underwriting standards forloan participations than they use when originating their own loans.Credit unions will also now have the ability to apply for waiverson certain key provisions of the rule.

At the Regional CUSO Alliance meeting, the only CUSOs that had anyissue with the rule revisions were the ones that operate a “closed”shop, meaning they serve a small number of only owner creditunions, said Bill Beardsley, president of Michigan Business Connection, a commercial lending CUSO in AnnArbor Mich.

These are the ones that are likely to experience issues with thelimits imposed by the rule, he added.

“However, the Regional CUSO Alliancehelps builds collaborative relationships between CUSOs so ourorganization may help alleviate this pressure when required,”Beardsley noted.

One of the CUSOs at the meeting said it decided to become theoriginating lender as a result of the rule and will hold therequired minimum 5%, Beardsley said.

“This is a really great use of the flexibility of being a CUSO,”he offered.

Beardsley said the CUSO proposal under consideration is aconcern, but most of the RCA members already have very closerelationships with examiners.

“So, the lack of current NCUA governance over CUSOs, or thepotential that they obtain authority over CUSOs, by itself, is nottoo much of a practical concern,” Beardsley said.

Meanwhile, the CUSOs in attendance at the RCA meeting said theycontinue to see very strong credit appetites from credit unions.Some CUSOs noted some discomfort with the loosening lendingenvironment, both by banks and credit unions, Beardsley said. TheCUSOs also reported very strong credit results with many enjoyingrecord loan volumes, he added.

The RCA also reviewed its mission statement and guiding beliefsand validated they are still relevant, Beardsley said.

“We're particularly glad to recognize that our participationprinciples – know your local market and spread the risk – arereally paying off for us and the industry,” he pointed out.

The RCA also elected new CUSO members to the group: Mark Ritter,CEO of Member Business Financial Services in Trevose Pa., and LindaCooper, president/CEO of The Cypress Group LLC in Orlando, Fla.

The RCA meetings are a great reminder of the value andimportance of collaboration, whether it's between CUSOs, creditunions, or both, said Keith Reed, president/CEO of Cooperative Business Services, a business lending CUSO inCincinnati.

“We are fortunate to have found so many like-minded MBL CUSOswho desire to do the right thing by their credit union clients andengage business lending is a safe and sound manner,” Reed said.

He added, “I believe it is the collective mission of RCA to worktogether, not against one another, as we serve our credit unions ina regional marketplace model, maximizing the cost- sharing andknowledge-sharing opportunities that a CUSO model can best deliverfor all concerned.”