We are getting ready to start using forebearance agreements for our workout and non-accrual loans. We will be forebearing all the interest during the non-accrual period to the end of the loan. My question concerns loans that we are refinancing into a new loan.

For example we have a loan with a principal balance $100,000 and they also have a balance of $10,000 of accrued interest for a total payoff of $110,000. Our new loan would be for the $100,000 balance and we would have a seperate forebearance agreement for the outstanding $10,000 worth of interest due at the end of the loan. My concern is that we are saying to the customer you stills owe us $110,000 but we are only disclosing the APR, payment, etc based on the $100,000?? I just wanted to make sure compliance wise we would be okay or if there is any guidance on the above?

I was just asked something similar and am curious if anyone has any thoughts. In our case we are looking at extending the loan with a modification.

If this a workout agreement, it would not be a refinance under 1026.20 regardless of what you do:

Paragraph 20(a)(4)

1. Workout agreements. A workout agreement is not a refinancing unless the annual percentage rate is increased or additional credit is advanced beyond amounts already accrued plus insurance premiums.

Thanks for the cite. I am now being asked if the interest due should be included in the final payment amount or if the interest amount should communicated separately?

You need to be asking that of your legal counsel.

That was my thought too but it always seems like they go to the compliance officer first.

That's because (1) you are more accessible and (2) don't bill for services or opinions.