Passage of a new rule by the National Credit Union Administration and strengthening loan demand have set the stage for Catalyst Corporate's new loan participation program to help credit unions manage their balance sheets.
Passage of a new rule by the National Credit Union Administration and strengthening loan demand have set the stage for Catalyst Corporate’s new loan participation program to help credit unions manage their balance sheets.
With credit union discussions underway, the pipeline of activity is picking up, and Catalyst Corporate’s new loan participation program is “ready to go,” said Jeff Hamilton, vice president of lending at Catalyst Corporate.
Catalyst Corporate’s newest service comes on the heels of NCUA’s June 20th approval of a loan participation rule that spells out new limits for credit unions wanting to acquire shared loans. The final rule approved by the NCUA sets a less restrictive limit of 100 percent of a credit union’s net worth—up from the 25 percent limit that the agency had first considered. Hamilton noted that a strong response from credit unions helped to shift NCUA’s position away from the more restrictive cap.
The new rule from NCUA, which includes other provisions designed to mitigate risk, sets clear guidelines just as the U.S. economy notches several quarters of loan growth that could heighten the attractiveness of a participation program. Indeed, recently released figures from the NCUA revealed the fastest first-quarter loan growth for federally-insured credit unions in five years. “Loan participations are an effective tool to help credit unions manage their business and their balance sheets,” Hamilton said. “They can help offset liquidity challenges and concentration issues, and enable credit unions to meet their members’ loan needs without exceeding policy limits or pressuring capital ratios.”
Catalyst Corporate acts as facilitator, bringing the “buyers and sellers” together in the loan participation process, but does not participate in the loans.
“Loan packages are comprised of consumer-type loans—auto loans and first mortgages—rather than commercial loans,” Hamilton said.
Loan participations are nothing new, Hamilton acknowledged. “And some credit unions have developed their own networks for participation loans.” However, the new service offered by Catalyst Corporate opens up the market to a potential nationwide network of credit unions. “It is no secret that larger credit unions are capturing a considerable percentage of the loans and could run into cap limits, while smaller credit unions have capacity and a need for loans. We think Catalyst Corporate’s loan participation service is well-positioned to help credit unions cooperate in a way that ultimately helps all credit union members,” Hamilton said.
For more information, please visit http://www.catalystcorp.org/lps.aspx.