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#2151306 - 10/26/17 07:20 PM Accept Partial Payments - Non-Amortizing Feature?
Tarhe Offline
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Just listened to an FDIC webinar where a question was asked that if the bank accepts partial payments, do we show that as a non-amortizing feature on the LAR? FDIC said Yes, you report that as a non-amortizing feature. That doesn’t sound right to me.

1003.4(a)(27)(iv): Any other contractual term that would allow for payments other than fully amortizing payments, as defined in Regulation Z, 12 CFR 1026.43(b)(2), during the loan term, other than the contractual terms described in this paragraph (a)(27)(i), (ii), and (iii).

1026.43(b)(2) Fully amortizing payment means a periodic payment of principal and interest that will fully repay the loan amount over the loan term.

Our Note calls for fully amortizing payments, however on the TRID disclosures, we check the box under Partial Payments that says, “your lender may accept payments that are less than the full amount due (partial payments) and apply them to your loan.” We do this for all loans, we do not reject payments. It is not a "contractual term", it is just what we do. So, based on the webinar, all of our loans will show Code 1 for YES for non-amortizing feature on the LAR?

Is that how others interpret this??

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#2151321 - 10/26/17 07:45 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
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I listened to that webinar as well. I think the key is "contractual". If it is your contract (note), then maybe it could be a non-amortizing feature (looking into that more closely). I don't believe the LE or CD is a "contract", so even if the language is in the CD about accepting partial payments, it would not make it a non-amortizing loan.

Anyone else with a take on this?
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#2151324 - 10/26/17 07:53 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
raitchjay Offline
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I don't think that's a non-amortizing feature. To make the loan fully amortizing, the consumer simply has to do what the contract calls for--make their regular periodic payments on time. What the bank will or won't do when the consumer breaks the contract by not making a full regular period payment on time isn't the point to me. If the borrower misses 8 payments in a row, the loan isn't currently amortizing....but it's not because the loan contract features non-amortizing features. That's how i see it anyway. I'll happily listen to other opinions.
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#2151373 - 10/27/17 12:48 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
RR Joker Offline
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that is some odd wording. Wouldn't most any contract 'allow' for payment in full at any time? Wouldn't that be a very similar thought to partial payments, or extra principal payments, etc?

I missed the first 30 minutes of that webinar, so apparently missed that entire convo....but I don't agree with it and as RJ says, I'd happily listen to other opinions.
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#2151463 - 10/27/17 04:56 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
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We're stumped on this too.

In Regulation Z, 12 C.F.R. § 1026.43(b)(2), the definition of “non-amortizing feature” is: Non-amortizing features means contract terms that would allow for payments other than amortizing payments

If our note contains language indicating that we would allow for partial payments, seems to me that we would need to report for HMDA that the loan has non-amortizing features. This sounded to me just what the FDIC said in their call yesterday.

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#2151485 - 10/27/17 05:32 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
rlcarey Online
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If your contract "allows" for partial payments and there is no penalty for such and the legal obligation does not become past due, then you have a non-amortizing loan. If you "accept" partial payments for processing rather than requiring them to make a whole payment - that is a whole different issue. The two should not be confused.
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#2151500 - 10/27/17 06:16 PM Re: Accept Partial Payments - Non-Amortizing Feature? rlcarey
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Originally Posted By rlcarey
If your contract "allows" for partial payments and there is no penalty for such and the legal obligation does not become past due, then you have a non-amortizing loan. If you "accept" partial payments for processing rather than requiring them to make a whole payment - that is a whole different issue. The two should not be confused.


Thanks for that explanation Randy. That makes me feel much better.
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#2151658 - 10/30/17 05:50 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
Skyline Offline
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If the Note has language that each monthly payment will be applied as of its scheduled due date and will be applied to interest before principal. If on (the maturity date), I still owe amounts under this Note, I will pay those amounts in full on that date....does this mean that it has a non-amortizing feature?
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#2151662 - 10/30/17 06:04 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
rlcarey Online
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That is pretty much standard language on any FNMA note - so no. That is just differentiating between a scheduled payment versus a simple interest note.
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#2151663 - 10/30/17 06:04 PM Re: Accept Partial Payments - Non-Amortizing Feature? Tarhe
Skyline Offline
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Thank you Randy!
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#2156257 - 12/06/17 06:04 PM Re: Accept Partial Payments - Non-Amortizing Feature? Skyline
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Do you think that one type of loan that is without fully amortizing payments would be a, for instance, a 90-day note in in which both interest and principle is due at the end of the term?

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