Loan participations are typically sold to correspondent banks because

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Correspondent banks offer the greatest monitoring opportunities because they have an established relationship with the loan originator and are able to conduct due diligence on underlying borrowers and collateral. This helps to mitigate risks and ensure compliance with regulatory requirements. Insiders may be trusted, but they do not necessarily have the same level of expertise and resources as correspondent banks. Best prices may be offered by other parties, but this is not the primary consideration when selling loan participations. Regulatory requirements may dictate certain aspects of loan participations, but they do not determine the choice of counterparty.

Loan Participations Are Typically Sold to Correspondent Banks Because