The participation market has inverted. A loan participation is a share of a loan that one lender sells to another. Demand now outstrips the best available supply, and that changes what a buyer's problem actually is. It is no longer price.
LendKey's January piece on forward flow describes the shift plainly. Forward flow is a standing agreement to buy a seller's new loans as they are made, instead of one block at a time. In LendKey's account, sellers could once move large blocks without difficulty. Now demand increasingly outstrips the best available supply, and top-quality assets draw several bidders at once. Spot transactions, the one-off sales of a single block, have gotten harder to execute. LendKey concludes that forward-flow commitments have moved from optional to necessary. It adds that a secondary market in those commitments is starting to form behind them.
That inversion changes the shape of the buyer's job. In a market with plenty of supply, the work is diligence and price. There is plenty of paper (loans for sale), so the job is to choose well and not overpay. In a market short of supply, the work is origination. The buyer has to be in front of the right seller before the block is shopped around. That means knowing who is going to need to sell before they have decided to.
The tell is on the balance sheet, not in the deal data
Participation data surfaces after the fact. The conditions that produce a seller show up earlier, and in other places. Loans grow faster than shares (member deposits). Cash runs down relative to peers. A concentration approaches an internal limit. Under those conditions an institution moves from being a buyer to being a seller. That role flip usually shows in the funding position a quarter or two before it shows in a deal.
Anyone with paper to sell can read the same observation from the other side. If demand really does exceed good supply, the seller's advantage is timing and reach. The seller needs to know which buyers have the appetite and the room this quarter, not last quarter. Then it needs to get there before the field does.
Treat buyer/seller role as a state that flips quarterly, not a fixed attribute of an institution. In a supply-constrained market, the edge comes from matching buyers to sellers.
Sources
Everything above is commentary on these. Read them first if the two disagree.