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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Financial Institution Letters

FIL-49-2015
November 6, 2015

Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations

Printable Format:

FIL-49-2015 - PDF (PDF Help)

Summary:

The FDIC is issuing the attached Advisory to update information contained in the FDIC Advisory on Effective Credit Risk Management Practices for Purchased Loan Participations (FIL-38-2012). This updated Advisory addresses purchased loans and loan participations and reminds FDIC-supervised institutions of the importance of underwriting and administering these purchased credits as if the loans were originated by the purchasing institution. The updated Advisory also reminds institutions that third-party arrangements to facilitate loan and loan participation purchases should be managed by an effective third-party risk management process.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised banks and savings associations, including community institutions.

Highlights:

- ensure that loan policies address such purchases,

- understand the terms and limitations of agreements,

- perform appropriate due diligence, and

- obtain necessary board or committee approvals.

Distribution:

Suggested Routing:

Related Topics:

Attachment:

Contact:

Note:

FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at https://www.fdic.gov/news/news/financial/2015/.

To receive FILs electronically, please visit https://www.fdic.gov/about/subscriptions/fil.html.

Paper copies may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).

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