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#1698588 - 05/11/12 01:59 PM Which loan do I report to CB?
travelgirl Offline
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Joined: Mar 2004
Posts: 223
Minnesota
We have a small personal line for $5,000 that has recently been put on non-accrual (due to a significant change in the borrowers financial condition and some other larger loans they owe us). The loan is still on automatic monthly payments of interest only - which the borrower has been paying (there was one 40 day late in March).

When we put a loan on non-accrual, we also set up a "shadow" or "dummy" loan on the system. This loan is used to continue billing the customer as if they real loan were not on non-accrual.

On the loan in question, when payments come in, they are posted to the "Shadow" loan as an interest only payment (that's all that was billed and what the note calls for) so the principal balance remains at $5,000. The interest amount paid is then posted as a principal payment to the "real" loan which is non non-accrual - so the principal balance on the "real loan is now for example $4975.

Which loan should I be reporting to the credit bureaus? Our loan ops dept is continuing to report the "real" loan - but I'm concerned that this could be inaccurate as the customer really owes the bank $5000 not the reported $4975 - the difference which will grow larger if interest only payments continue on.

What is the bank going to do once (and if) the "real" loan gets to $0 (which is what is reported on the credit report) and the customer is still receiving bills for $5000 from the "shadow" loan?

I believe we should be reporting the the "shadow" loan because that's what accurately reflects what the customer owes. However, I am not sure when it comes to non-accrual loans. Are we supposed to report the loan as being on non-accrual status similar to what we'd do if the loan were charged-off? I don't see an "Account Status Code" on my list for a non-accrual loan.
Last edited by travelgirl; 05/11/12 02:01 PM.
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#1698602 - 05/11/12 02:11 PM Re: Which loan do I report to CB? travelgirl
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,228
Galveston, TX
You have to report the loan record that reflects the payments according to the loan contract. Placing a loan in non-accural is an accounting issue for the bank and does not impact the individual's legal obligation. Sounds like you are definitely on the right track. Most bank's shadow systems reflect the non-accrual accounting status not the main system.
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#1698676 - 05/11/12 03:24 PM Re: Which loan do I report to CB? rlcarey
travelgirl Offline
100 Club
Joined: Mar 2004
Posts: 223
Minnesota
Thanks Randy. Just to be clear, I should be reporting the full $5000 principal because that's what they contractually owe? So the shadow loan not the "real" loan?

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#1698767 - 05/11/12 05:16 PM Re: Which loan do I report to CB? travelgirl
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,228
Galveston, TX
If the shadow loan is the one that is treated under the constractual agreement, you are correct, that is the one to report.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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