§32501. Participation loans

Link to law: http://legislature.vermont.gov/statutes/section/08/222/32501
Published: 2015

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The Vermont Statutes Online



Banking and Insurance








32501. Participation loans

(a) Subject to

the provisions of this section, a credit union may participate in loans to

credit union members jointly with other state or federally chartered credit

unions, credit union organizations, or other federally insured financial

institutions pursuant to written policies established by the credit union's

governing body. As used in this section, "credit union organization"

means any organization established primarily to serve the daily operational

needs of its member credit unions. The term does not include trade

associations, membership organizations principally composed of credit unions,

or corporations or other businesses that principally provide services to credit

union members as opposed to corporations or businesses whose business relates

to the daily in-house operations of credit unions.

(b) No credit

union shall obtain an interest in a participation loan if the sum of that

interest and any other indebtedness owing to the credit union by the borrower

exceeds the limitations set forth in this title and in rules adopted by the


(c) The credit

union shall execute a written master participation agreement and shall retain

the written master agreement in the credit union's office. The master agreement

shall include provisions for identifying, either through a document that is

incorporated by reference into the master agreement or directly in the master

agreement, the participation loan or loans prior to their sale.

(d) A credit

union may sell to or purchase from any participant the servicing of any loan in

which it owns a participation interest.

(e) The credit

union originating the loan shall:

(1) Originate

loans only to its members.

(2) Retain an

interest of at least ten percent in the face amount of the loan.

(3) Retain the

original or copies of the loan documents.

(4) Require the

credit committee or loan officer to use the same underwriting standards for

participation loans as are used for loans that are not being sold in a

participation agreement, unless there is a participation agreement in place

prior to the disbursement of the loan. Where a participation agreement is in

place prior to disbursement, either the credit union's loan policies or the

participation agreement shall address any variance from nonparticipation loan

underwriting standards.

(f) A

participant credit union that is not the originating lender shall:

(1) participate

only in loans it is empowered to grant, and shall have a participation policy

in place that sets forth the loan underwriting standards prior to entering into

a participation agreement.

(2) participate

in participation loans only if made to its own members or members of another

participating credit union; however, this subdivision shall not apply if the

originating lender is a federally insured financial institution that is not a

credit union.

(3) retain the

original or a copy of the written participation loan agreement and a schedule

of the loans covered by the agreement; and

(4) obtain the

approval of the governing body, such person or persons or such committee

authorized by the governing body to act on participation loans, or the

investment committee for the disbursement of proceeds to the originating lender

in accordance with the credit union's loan participation policy. (Added 2005,

No. 16, § 1, eff. July 1, 2005.)