Our commercial open ended lines of credit have a "hard maturity date." They are set at 60 months. I recall decades ago at a different institution, the commercial loan department always set a maturity date for two reasons. First, commercial loans and the market can be volatile. Secondly, setting a hard date was based on risk and S&S. I was also under the impression it was a regulatory requirement to set a due date, but I could be mistaken. These loans are continually monitored. At the 5 year mark the loan applicant(s) would be required to go through standard underwriting processes. I have seen banks disclose maturity dates out 10 and 20 years.

The department supervisor wants to change the process and simply leave these loans as open-ended. No maturity date. She also wants to know if she can do a system file maintenance on all the accounts and remove the due dates from the system. My head hurts...

I am used to working with consumer loans. Commercial lending is a world onto itself. A modification would be out of the question because you would be removing the term. A refinance is the only way to change this, as far as I am concerned.

Any input would be appreciated.

You are talking about a legal issue and not a compliance issue. As far as removing current maturity dates from the system, are they suggesting removing them when the underlying notes have maturity dates in them? I would never agree to that. Many commercial lines like this may not have specific maturity dates, but usually contain provisions that the customer has to provide financial information on an annual or other basis and the line with be periodically reviewed.

I worked at a FI where they had commercial RLOC's without a maturity date and, as Randy stated, there was a provision included that they had an annual review. Unless there are any legal implications, you could use a modification agreement to change the terms on a commercial loan, which would include removing the maturity date & adding a periodic review provision but that is only if there aren't any legal/State law issues.