Loans to an Insider and Reg O
Answer by Dan Persfull, BOL Guru Guru Bio
Question: If loans to an executive officer were made prior to becoming an insider, would a rate modification now remove that exemption? In this case, if the rate modifcation would somehow fall under the Reg O definition of extension or renewal, the insider would exceed the $100,000 limit and would have to go elsewhere.
Answer: Yes, a modification to the existing loan would cause it to lose its exemption as well as any new credit extended to the insider. The modification obligates the EO to repay money under the new terms. (7) Any other similar transaction as a result of which a person becomes obligated to pay money (or its equivalent) to a bank, whether the obligation arises directly or indirectly, or because of an endorsement on an obligation or otherwise, or by any means whatsoever.
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