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#1157322 - 04/03/09 04:26 PM Work out Loans
Tesla Offline
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Joined: Nov 2003
Posts: 3,726
We are beginning to see a lot of workouts, as I assume other banks are too. This is new to us and I am trying to find out how others handle this. Do you have a specific policy and procedure for workouts or is part of your loan policy? The lenders swear there are NO compliance rules for workouts, but I (compliance) do not believe that. Do you follow compliance rules for workouts? One example I am sketchy on is an application/joint intent. Do you require an application for a workout? Do you have a formal memo the lender writes explaining the workout and its status? Do you have examples (redacted, of course :)) of these memos of if you use a compliance checklist for this purpose, would you be willing to share?

Thanks in advance for any guidance you can provide! smile
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Lending Compliance
#1157329 - 04/03/09 04:36 PM Re: Work out Loans Tesla
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It depends on the circumstances and the regulation.

Reg. B: If the workout is initiated by the bank, there would be no application. If the workout is initiated by the customer, it would be a request for credit.

Reg. Z: Subsequent dislcosures - A change in the payment schedule or a change in collateral requirements as a result of the consumer's default or delinquency, unless the rate is increased, or the new amount financed exceeds the unpaid balance plus earned finance charge and premiums for continuation of insurance of the types described in Sec. 226.4(d).

Flood - always

Etc.

Fair lending is also another consideration. What is good for one is good for all in like situations.
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#1157353 - 04/03/09 04:49 PM Re: Work out Loans Tesla
Tom at HOME Offline
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Joined: Oct 2005
Posts: 1,139
It is amazing how the world turns and repeats itself. I was a workout officer (we called it a special assets officer, it sounded better). We did not have the regulatory requirements that you have but the techniques and concerns are the same.

As a special asset officer is when I learned of all the documentation errors we were making. You discover this when you go to court and lose. Your regulatory concerns are a blip on the screen compared with documentation errors that cause you to lose (1) the collateral, (2) the obligation (note), (3) secondary obligors (co-signers and guarantors, etc.), and (4) giving the obligor, debtor or guarantor a claim against the bank.

Most errors are made after the loan hits the skids and you do a workout loan. Your workout people should not be regular loan officers. The logic used in a workout is not the same as is used in a regular loan. Regular loan officers will make major errors that will cost you big.

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#1157373 - 04/03/09 04:57 PM Re: Work out Loans Tom at HOME
Tesla Offline
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Joined: Nov 2003
Posts: 3,726
Randy - thanks for the advice. smile

Tom - thanks for your thoughts too. Although the compliance concerns may seem like nothing in the big picture, they are a big concern to me because it is a big deal to the examiners. Don't get me wrong, I understand the real issue is perfection of liens, etc., but my role right now is being sure the workout is compliant. smile

What a crazy world we live in, huh? crazy
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