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:
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
participant credit union that is not the originating lender shall:
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.
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
(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.)