Lending Council Releases Loan Participations White Paper

Christopher Morris
CUNA Councils
(608) 231-4102

Madison, Wis. — Loan participations offer the best of cooperative philosophy put into practice—sharing loan risks among borrowers while sharing the rewards. But they also offer challenges due to their complexity and increased regulatory scrutiny. The CUNA Lending Council recently released a white paper, “Loan Participations,” which highlights the benefits as well as some of the drawbacks to this type of lending.

“Participations can be a lifeline for small credit unions,” according to Deborah Trapani, CEO of Sierra Point Credit Union, $31 million in assets, South San Francisco, Calif.

“Ten years ago, I saw that consumer lending was declining and loan participations were another option for income,” Trapani says. “We essentially have three loans to make: consumer, credit unions are not doing well with consumer loans; real estate, property values are still high in California; and business loans.”

According to the paper, the benefits of loan participations can be considerable: a source for selling loans to keep under the 12.25% business lending cap; geographic and loan type diversification; and the average loan yield can be three times the amount of the average investment. But along with the benefits, loan participations are more complex and when the loan goes south the misery of hefty dollar losses is shared with all.

The white paper examines a variety of business models using this loan type, a sample policy, board questions, regulatory oversight, information on finding a partner, and more. For example, the board in its role as watchdog also needs to decide whether management has a thorough understanding of the risks, underwriting, pricing, and terms of each loan, whether it’s member business, real estate, or construction lending. Managing participation loans requires a calculated approach from experienced lending staff; these loans require constant oversight as market risk and credit risk change over the loan term.

CUNA Council members are entitled to complimentary copies of these and more than 200 white papers; non-members may purchase the white papers for a price of $50 per copy. 

The paper is available online in the white paper section of – select the “Lending” tab.

Press contacts can download the white paper here (until 9/29):


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CUNA Lending Council

The CUNA Lending Council is the premier source of best practices information for lending professionals in the credit union industry. Guided by a self-directed and self-governed community of more than 900 industry lending professionals, the council provides networking support, education, current information, and professional development tools for its members. The CUNA Lending Council is one of the six organizations that make up the CUNA Councils, a network of more than 4,850 credit union professionals. For more information, visit or 

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