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#2163028 - 02/02/18 09:25 PM Demand Note Reaffirmation = Renewal?
CaseyJones Offline
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CaseyJones
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Posts: 79
An institution offers 1-year demand note lines of credit to commercial customers. These notes act the same a regular line of credit, but do not have a listed maturity date on the note and the institution can call them at anytime.

On the core system, it still lists the maturity date as a year past origination for record keeping. Following one year past origination the institution can call the note, OR "reaffirm" the note. The reaffirmation includes a credit review and the issuance of a new note to the borrower, again with no listed maturity date.

On the internal system the maturity date is moved back another year.

So my question:
These "Reaffirmations", even though there is no listed maturity date on the note, seem a lot like a renewal and extension of credit to the borrower.

Can the CRA officer call these "reaffirmations" a loan renewal/extension for CRA credit?

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#2163326 - 02/06/18 07:36 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
CaseyJones Offline
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CaseyJones
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Posts: 79
Any ideas?

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#2163495 - 02/07/18 06:04 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
RR Jen Offline
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RR Jen
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My thoughts are along the lines of "it depends" and I'd probably gather my facts and ask my friendly neighborhood CRA examiner for a verdict.

Based on your post, it would appear the bank is making a credit decision by reviewing financials annually and that might be enough to trigger it as a renewal. Does the borrower sign anything to agree to the additional year? Depending on the original contract, that may not be necessary and you may be hung up on an accounting procedure that has nothing to do with renewing the credit.

Sorry I'm no help!
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#2164796 - 02/15/18 08:18 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
CaseyJones Offline
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CaseyJones
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Posts: 79
Thanks Jen,

Yes we are making a new credit decision, in that we re-evaluate the credit annual and make a decision as either we call the note or we "reaffirm" it and continue the line of credit to the borrower for one more year. Maturity date is adjusted on our system, but physical note remains with out one.

That is why it feels like a renewal to me, but with regulators being a stickler for certain rules I did not know if just having that maturity date not on the note eliminated it.

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#2164807 - 02/15/18 09:16 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
fmissle Online
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Pac NW
I don't think you report it as a renewal based on this section from the Guide. If i remember correctly, this has been in previous versions as well.
https://www.ffiec.gov/cra/pdf/2015_CRA_Guide.pdf (page 12)

Quote:
Note: A demand loan that is
reviewed on an annual basis should
not be reported as a renewal
because the term of the loan has
not been extended.

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#2164898 - 02/16/18 03:26 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
RR Jen Offline
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RR Jen
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Good to know fmissle! I obviously didn't go search the Q&As. Sorry Casey Jones!
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I don't need any more negativity in my life...be positive and helpful people or I will kick you in the shins!!!

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#2166370 - 03/01/18 06:43 PM Re: Demand Note Reaffirmation = Renewal? CaseyJones
CaseyJones Offline
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CaseyJones
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Posts: 79
Dang, you're right that is in there. Well thanks for the help guys.

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