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#2189292 - 08/15/18 09:07 PM Commercial Loans at 100% LTV
Anonymous
Unregistered

Our lending area is looking to do loans where the bank will lend up to 100% LTV and then take 20% of the proceeds which will be held as collateral as a Time Deposit so it will be an LTV 0f 80%

Have any of you heard of this and do you know any guidance and how to report it on a Call Report...etc?

These are the lending area's questions...

Thanks

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#2189378 - 08/16/18 03:46 PM Re: Commercial Loans at 100% LTV Anonymous
Anonymous
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#2189383 - 08/16/18 04:08 PM Re: Commercial Loans at 100% LTV Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
You haven't said what your collateral might be - are you talking about commercial real estate?? What does LTV have to do with call reporting? What does this mean "take 20% of the proceeds"? You are depositing 20% of the loan proceeds into a CD?
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#2189386 - 08/16/18 04:14 PM Re: Commercial Loans at 100% LTV Anonymous
Anonymous
Unregistered

Sorry RL.Carrey, I will clarify:

1. Commercial Real Estate
2. I don't know, the manager was concerned that if it was a 100% LTV collateral loan, the bank has to report it on the CALL Report?
3. Yes, the depositing of 20% of the proceeds to a Time Deposit that will be collateral for the loan along with the property...

Thanks

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#2189391 - 08/16/18 04:30 PM Re: Commercial Loans at 100% LTV Anonymous
ACBbank Offline
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ACBbank
Joined: Jul 2006
Posts: 4,344
New York City
Who's keeping the interest on the funds in the CD?
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#2189450 - 08/16/18 07:17 PM Re: Commercial Loans at 100% LTV Anonymous
Anonymous
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The customer will keep the funds...

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#2189469 - 08/16/18 07:54 PM Re: Commercial Loans at 100% LTV Anonymous
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Sounds like they are trying to skirt "section 365" [FDIC's version] rules which are reported and contain limits based on capital, but I don't believe they go to the CALL report.

Loans in Excess of the Supervisory Loan-to-Value Limits

The agencies recognize that appropriate loan-to-value limits vary not only among categories of real estate loans but also among individual loans. Therefore, it may be appropriate in individual cases to originate or purchase loans with loan-to-value ratios in excess of the supervisory loan-to-value limits, based on the support provided by other credit factors. Such loans should be identified in the institution's records, and their aggregate amount reported at least quarterly to the institution's board of directors. (See additional reporting requirements described under "Exceptions to the General Policy.")

The aggregate amount of all loans in excess of the supervisory loan-to-value limits should not exceed 100 percent of total capital.2 Moreover, within the aggregate limit, total loans for all commercial, agricultural, multifamily or other non-1-to-4 family residential properties should not exceed 30 percent of total capital. An institution will come under increased supervisory scrutiny as the total of such loans approaches these levels.

In determining the aggregate amount of such loans, institutions should: (a) Include all loans secured by the same property if any one of those loans exceeds the supervisory loan-to-value limits; and (b) include the recourse obligation of any such loan sold with recourse. Conversely, a loan should no longer be reported to the directors as part of aggregate totals when reduction in principal or senior liens, or additional contribution of collateral or equity (e.g., improvements to the real property securing the loan), bring the loan-to-value ratio into compliance with supervisory limits.

https://www.fdic.gov/regulations/laws/rules/2000-8700.html
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#2189492 - 08/16/18 09:11 PM Re: Commercial Loans at 100% LTV Anonymous
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
If I was buying a piece of commercial property for $100,000 and wanted a loan, why in the world would I borrow 100% of the LTV ($100,000) and then have to come up with the 10% ($10,000) down payment with my own money and then have you also place 10% ($10,000) of the money that I borrowed into a CD that I had to pledge to the loan?

There are some really big pieces missing from this puzzle.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2189523 - 08/17/18 01:12 PM Re: Commercial Loans at 100% LTV Anonymous
Anonymous
Unregistered

I know rlcarey, I know! I have asked them for much more information on this proposed loan product!. As always, thank everyone for your help! smile

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#2189653 - 08/17/18 07:15 PM Re: Commercial Loans at 100% LTV Anonymous
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I agree I don't think they've thought through the math at all...but I still bet you they are trying to find away to skirt supervisory LTV exception reporting wink
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My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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