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.