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December 19, 2014
PREPAID PRODUCTS - Understanding the CFPB Proposal
John Burnett

January 6, 2015
Business Accounts Documentation and Procedures with Beneficial Ownership
Deborah Crawford

January 6, 2015
FFIEC Cybersecurity Initiatives and Observations from the 2014 Assessments
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The ABC's of IRAs - The Basic Ingredients
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Navigating the Treacherous Waters of IRA Rollovers, Transfers and Beneficiary Payouts
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January 28, 2015
Mortgage Life Cycle
Part I
David Dickinson and Jerod Moyer

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#1616791 - 10/18/11 10:45 AM Collateral Dependent Definition
ATLbanker Offline
Gold Star

Registered: 09/07/05
Posts: 301
Loc: Georgia
We have used the definition of collateral dependent as a loan where the ultimate repayment of the loan is based upon the sale of the collateral. We have an FDIC examiner who is stating that if the customer is servicing the debt then the loan is not collateral dependent even if ultimate repayment will be from the sale of the collateral. Would anyone mine sharing how they define collateral dependent? Thanks in advance.

Lending Compliance
#1616796 - 10/18/11 10:53 AM Re: Collateral Dependent Definition [Re: ATLbanker]
straw Offline
Power Poster

Registered: 11/20/02
Posts: 9111
Under the examiner's definition, how would any loan be collateral dependent? The only loan that could be would be a single payment balloon, as any loan with recurring payments would clearly be paid from some source other than the collateral.

However, if the cash flow is insufficient to make the payments, based on your underwriting standards, and you are willing to make the loan based strictly on asset value, then that, in my mind, is a collateral dependent loan.

#1616800 - 10/18/11 11:02 AM Re: Collateral Dependent Definition [Re: ATLbanker]
HRH Okie Banker Offline
Power Poster

Registered: 01/14/03
Posts: 2596
Loc: Oklahoma
"Collateral dependent" means when the repayment of the loan comes only from the collateral, and there are no other sources of repayment.

Example would be if loan if for an apartment complex, secured by same and the loan is repaid from rental income from the property and without that rental income the customer could not service the debt.
Just working here until I get my letter from Hogwarts.

#1617090 - 10/18/11 03:25 PM Re: Collateral Dependent Definition [Re: HRH Okie Banker]
ATLbanker Offline
Gold Star

Registered: 09/07/05
Posts: 301
Loc: Georgia
We have a loan secured by vacant land. Customer pays interest monthly out of pocket. Payoff will occur when land is sold. We thought this loan would be collateral dependent. Since customer has never missed a payment examiner thinks not collateral dependent. Now we do not like looking a gift horse in the mouth, but our concern is if we change to this examiners definition what will happen when the next examiner comes in. Examiner is saying payment is coming from some other source than the collateral.

#1626803 - 11/09/11 04:49 PM Re: Collateral Dependent Definition [Re: ATLbanker]
Franke Offline
New Poster

Registered: 07/15/11
Posts: 10
Did you ever get any more clarification on this? Because the guidance is not clear. I've seen references to collateral dependent as referring to the underlying value of the property, but I've also seen reference to operation of the property in some cases. If you have a loan to an entity that owns a commercial property, which has tenants as a source of repayment, is this "collateral dependent"? If there was no revenue, and the ultimate source of repayment was from the sale of the property, for TDR purposes, would this be "collateral dependent"?


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