What You Should Know About the Advantages and Pitfalls of Loan Participations
At the time an institution enters into a lending arrangement with a borrower, or some time thereafter, it may wish to sell a portion of the loan to another institution. On the other hand, there may be instances where an institution may wish to purchase a portion of a loan made by another institution.
Such a sale or purchase may occur in connection with short-term borrowings, term loans, construction loans, or other forms of extension of credit. This area of lending is closely monitored by regulators because of the inherit risk in this type of lending and institutions’ failure to take the necessary precautions to avoid undue problems.
This course is designed to provide the basic requirements for successful loan participations or syndications. The information presented in this session will be helpful to institutions buying/selling participations among affiliate institutions or to unrelated institutions.
At the end of this session, the participant should have a firm understanding of the minimum required standards to purchase and sell loan participations or participate in loan syndications in order to remain in compliance with safe and sound banking practices.