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November/December 2017 Issue: Front Page > VolCorp Spotlight
VolVoice


Service Spotlight
Loan Participation: A Tool for Balance Sheets of All Sizes

LoanStreet What is LoanStreet? The short answer is an innovative loan participation solution that enables the efficient sale of any size or type of loan to one or more credit unions. In reality, it is so much more!

LoanStreet’s easy to use online platform automates and standardizes partial and whole loan sales, creating a single marketplace to buy, sell, and manage loans. There are no hidden fees, and you'll have less administrative burden thanks to a standardized loan participation agreement and detailed monthly reports. Historically, smaller credit unions have been excluded from the loan participation process because it can be highly manual, expensive, and error prone. With LoanStreet, credit unions of all sizes can efficiently and cost effectively establish and manage their loan participation program.

In collaboration with LoanStreet, VolCorp recently authored a white paper titled, "Making the Case for Loan Participations: The Economics of It All". The goal was to highlight some case studies of other VolCorp members actively using the platform while providing a tool to help explain loan participation to your board. Listed below are a few key points highlighted within the paper.

Credit unions, both buyers and sellers of loans, choose to engage in loan participation for a variety of reasons, including generation of alternate income streams, balance sheet diversification, and risk management.

  • Participations allow originating (selling) credit unions to make above lending limit loans or loans that would otherwise exceed member borrowing limits or regulatory caps;
  • With respect to buyers, loan participations provide the opportunity for diversification through the purchase of a variety of different loans types, including business loans, without incurring the burdens of loan servicing;
  • Selling institutions, through the reduction of concentration risk, can use the cash from loan sales to make additional loans to its members, thereby increasing the total number of loans on its balance sheet;
  • Purchasing loan participations enables the buyer to utilize excess liquidity to increase its loan-to-share ratio and increase the total number of loans on its balance sheet; and
  • For selling institutions, a strong participation program can increase noninterest income through the premium received at the time of sale and servicing income over the life of the participation generated from servicing the loans on behalf of the purchasers.

Sample Case Studies:

“I have had prior experience selling loan pools with previous institutions, and by far, LoanStreet has made sales much easier than with my previous institutions. Additionally, the month end reports provided by LoanStreet are very clear, concise and easy to read. This allows our accounting department to reconcile in a timely manner, ultimately saving us money.”
Ron Smith, CEO, Electric Service Credit Union (Seller)

“Our loans are up about $1.3 million due to loan participation purchases and our income is up over $2,000 per month. We’ve purchased even more loans since then, so the impact on EPB’s financial condition is huge.”
Trey House, Assistant Manager, EPB Employees Credit Union (Buyer)

If you would like to request a copy of the white paper in its entirety, please email investments@volcorp.org.

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