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Utah Administrative Code (Current through November 1, 2019) |
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R331. Financial Institutions, Administration |
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R331-12. Guidelines Governing the Purchase and Sale of Loans and Participations in Loans by all State Chartered Financial Institutions |
R331-12. Guidelines Governing the Purchase and Sale of Loans and Participations in Loans by all State Chartered Financial Institutions
| R331-12-1. Authority, Scope, and Purpose |
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Latest version.
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(1) This rule is issued pursuant to Section 7-1-301. (2) This rule applies to all state chartered financial institutions. (3) The purpose of this rule is to establish guidelines for the purchase and sale of loans and participations in loans by state chartered financial institutions. |
| R331-12-2. Definitions |
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Latest version.
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(1) "Participation" means the purchase or sale by a lender of a loan or part of a loan under circumstances in which the acquiring institution (a) has no formal or direct role in establishing the terms and conditions binding the borrower, or (b) is not a signatory of the loan agreement binding the borrower. (2) "Participation agreement" means an agreement between the lead financial institution and the participant financial institution spelling out in detail the terms, conditions, and understandings between the parties to a loan participation. (3) "Recourse" means an oral or written agreement whereby a selling institution of a loan or participation in a loan agrees to repurchase in whole or in part upon request of the purchaser or the seller. |
| R331-12-3. General Rule |
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Latest version.
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(1) A written participation agreement covering multiple or individual participations will be on record at each participating institution, and shall include, at a minimum, the following: (a) The party to the agreement to be paid first from the loan repayment proceeds; (b) Party responsible for collection of the note in the event of default; (c) How collection or other expenses related to the participation will be divided among the participants; (d) Recourse arrangements in writing outlining the rights and obligations of each party. Generally, loans will not be sold on a recourse basis except in cases where the sale is made for the purpose of obtaining temporary funds for operations. (2) In addition, a financial institution which buys and sells loans or participations in loans shall establish written policies setting forth satisfactory controls over such sales and purchases. At a minimum, the following conditions shall be met: (a) The loan must comply with applicable state and federal laws; (b) The purchased loan must conform to the financial institution's lending and loan approval standards; (c) Complete and current credit information must be maintained during the term of the loan; (d) The financial institution must maintain evidence of sufficient overall loan documentation including an analysis of the value and lien status of collateral; (e) The status of principal and interest payments including accrual status must be available. |