Source: Shutterstock.A new online loan participation platform is promising to seamlessly connect credit unions that are buying and selling loan pools.
The Plano, Texas-based, $3.9 billion Catalyst Corporate Federal Credit Union announced its new loan participation exchange, called LPX, on July 21. Catalyst Corporate said it built the “user-friendly platform” after more than five years in the loan participation market and having settled more than $3 billion in participations.
“Simply put, the Loan Participation Exchange is an industry-developed solution that is exclusively focused on serving credit unions,” Jeff Hamilton, Catalyst Corporate’s vice president of member credit, said in a statement.
Credit unions using the new platform can see due diligence information within the exchange, and there’s a function that allows credit unions to be notified by text message when new loan pools appear. Catalyst Corporate said the exchange is set up to allow customized deals to certain credit unions or the entire network.
All the funds stay within the credit union industry, Catalyst Corporate said. “We believe this helps strengthen the credit union industry, while providing bottom line assistance to individual credit unions,” Hamilton said.
Loan participations have attracted increased attention amid the virus-era challenges imposed on the industry.
“In today’s ‘COVID-19 economy,’ credit unions face a triple threat of rising liquidity, slack loan demand and low yields. Growing the portfolio with higher-yielding assets is a challenge in this environment,” Christian Widhalm, chief revenue officer at LendKey Technologies Inc., wrote in CU Times this month. “But loan participations — especially if generated through an efficient and robust technology platform — can provide a solution to credit unions’ liquidity and earnings challenges.”
In 2013, the NCUA announced a loan participation revised rule to protect “the purchasers in loan participation arrangements, while giving credit unions the flexibility to use these products to diversify portfolios, improve earnings, generate loan growth and manage balance sheets.”
“As with all loans, proper and thorough due diligence is critical. Due diligence begins by thoroughly addressing your loan participation policy, agreements and your risk assessment and monitoring processes,” the NCUA said in a December 2016 newsletter.
Catalyst Corporate, which initiated its loan participation program in 2014, said it has built up “an extensive network of credit union buyers and sellers.” Hamilton said nearly 200 credit unions have participated in the program, buying and selling loan participations, since it was launched.
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Catalyst Corporate FCU Launches New Loan Participation Exchange - Credit Union Times
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