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#1156686 - 04/02/09 05:54 PM CD's held as loan collateral
kiemo Offline
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kiemo
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Posts: 267
MidUS
As a relatively new internal auditor, I've come across a practice that I cannot seem to find a back up answer to:
Currently, when a loan that has been secured by a CD(which is also physically held in vault) is paid off, the CD hold is coded to remain held for a period of a month before funds are released. This is true whether ot not it is paid by an 'on us' check that has immediately cleared. Appears not policy determined but I was told it is a 'procedure'. This does not seem correct or acceptable but I don't know what regulatory information to cite. Any info would be appreciated.

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#1156712 - 04/02/09 06:15 PM Re: CD's held as loan collateral kiemo
Tom at HOME Offline
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Are your CDs instruments or deposit accounts? If you don't know you may have more problems than you think.

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#1156877 - 04/02/09 08:31 PM Re: CD's held as loan collateral Tom at HOME
kiemo Offline
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kiemo
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MidUS
They are the old fashioned paper instruments.

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#1157058 - 04/03/09 03:34 AM Re: CD's held as loan collateral kiemo
Tom at HOME Offline
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Quote:
They are the old fashioned paper instruments.


Do these “old fashioned paper instruments” include the phrase “non-transferable” or “non-assignable” because if there is, in most states, they are not instruments, but deposit accounts. Instruments must be in negotiable form and limiting transfer or assignment make them non-negotiable and they are not instruments. This really does matter.

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#1158094 - 04/06/09 02:09 PM Re: CD's held as loan collateral Tom at HOME
kiemo Offline
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kiemo
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MidUS
Sorry to be so slow---out with flu.
Phrase used in agreement is "you cannot transfer this account without our written consent." and includes ability to pledge or assign account as collateral.....

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#1158734 - 04/07/09 04:35 AM Re: CD's held as loan collateral kiemo
Tom at HOME Offline
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Doesn’t sound like an instrument to me.

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#1158778 - 04/07/09 01:29 PM Re: CD's held as loan collateral Tom at HOME
kiemo Offline
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kiemo
Joined: Jan 2009
Posts: 267
MidUS
We can agree that they are actually CD 'accounts'. So how does failure to release collateral fit in? It's still holding funds (albeit in a CD account)that bank no longer has a right to hold. Correct? Thank you for your time.

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#1159162 - 04/07/09 05:42 PM Re: CD's held as loan collateral kiemo
Tom at HOME Offline
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If the collateral is a deposit account and if there is no outstanding secured obligation and the secured party is not committed to make advances, if and when the debtor requests in writing the release of such collateral the lender must do so within 10 days of the request. This is mandatory only if requested is in writing. [9-208]

I would treat oral request in the same manor. Other than that, you’re on your own.

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#1159171 - 04/07/09 05:50 PM Re: CD's held as loan collateral Tom at HOME
kiemo Offline
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kiemo
Joined: Jan 2009
Posts: 267
MidUS
Thanks Tom! I don't understand why it is O.K. 'unless requested in writing', but guess I've gone on long enough..

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