The participation loan system in CU*BASE is designed for tracking loans that are sold to investors. It is not recommended to set up purchased participation loans in CU*BASE for the following reasons:
Inaccurate Delinquency Reporting
Participation loan settlement with the investor occurs at month end; therefore, payments are not received from the purchasing institution until the 1st of the following month (regardless of what day the payment was actually made at the purchasing institution). The loan will inaccurately be considered delinquent in CU*BASE and a delinquency notice may generate.
Example: Loan #1234 is purchased by ABC Credit Union on 4/21/19 from XYZ Investor. The first payment is due 5/21/19. The payment is made on 5/21/19 (on time) by the member at XYZ Investor. ABC Credit Union does not receive the payment until 6/1/19 (after XYZ investor has processed the monthly settlement). If Loan #1234 was set up in CU*BASE, it would be considered 10 days delinquent as of 5/31/19, even thought the loan is not actually delinquent.
Manual Processing of Payments
Payments will need to be processed manually to ensure the correct posting of principal and interest amounts. If the payment is processed as a regular payment on the 1st of the month, the system will pay the interest through the first of the month (in this example) and the principal and interest breakdown would be different than what was reported to you on the month end settlement report from the investor.
Potential for Duplicate Reporting
Credit bureau reporting, 1098 interest reporting and member statements are already being generated (if applicable) by the originating investor. We do not want to duplicate any of this reporting in CU*BASE for the same loan.
Member Reporting
If a purchased participation loan is created in CU*BASE, the account owner is considered a member, when in fact the owner is not a member of the credit union. Reporting of member counts at the credit union would be skewed.