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#1441247 - 09/10/10 10:21 AM Refinance - Rolling Interest
Anonymous
Unregistered


If a customer wants to refinance an existing loan, are there any issues with rolling the interest due on the existing loan into the new loan? The existing loan is in good standing? I am being told not to do it because it is capatilized interest, but I am pretty sure that does not apply.

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#1441347 - 09/10/10 11:56 AM Re: Refinance - Rolling Interest [Re: Anonymous]
Rocky P Online
Power Poster

Registered: 06/24/03
Posts: 4737
Loc: South Carolina
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

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#1441364 - 09/10/10 12:18 PM Re: Refinance - Rolling Interest [Re: Rocky P]
Anonymous
Unregistered


I mean require the borrower to bring the interest to closing as cash rather than have it included in the new loan amount.

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#1441370 - 09/10/10 12:24 PM Re: Refinance - Rolling Interest [Re: Anonymous]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 41064
Loc: Bloomington, IN
What type of loan is this?

If you are talking about refinancing a mortgage loan or other consumer loan there is no prohibition from including the accrued interest from the date of the last monthly payment to the date of payoff in the new loan amount?
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1441377 - 09/10/10 12:28 PM Re: Refinance - Rolling Interest [Re: Dan Persfull]
Anonymous
Unregistered


Either mortgage or consumer. That is what I thought. Thank you.

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