Vermont § 32501 - Participation loans

§ 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 Commissioner. (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.)