How could an existing loan be in good standing if the customer cannot pay the interest charges that are do? (Unless you mean not yet delinquent - a timing issue.)
Regulators generally frown on capitalizing interest - especially the OCC. They consider it as a sign of weakness - both for character and capacity. They have old guidance in EC-229.http://www.occ.treas.gov/ftp/ec/ec-229.txt
I survived an OCC Fair Lending/Comparative File Review of 1,756 loans with no findings that stuck!
CRCM, CIA, CRP, CBA