If we let customers affected by COVID defer payments and the bank extends the maturity date, that would not trigger any TRID documents to my understanding. Would that trigger a new note or modification agreement at the very least?

We've got a similar question. We would charge a deferment fee to the customer. If we allow the customer to roll the fee into their balance, is that considered a finance charge therefore we'd have to do some redisclosures? Does anyone else allow customers to roll the fee onto the balance?

We will be offering modifications to customers and will get a modification or change in terms document signed; however we will not be charging a deferment fee. For real estate secured loans if the term is extended it triggers some flood verification, but we're aware of those issues.

If you use the search function there are several threads concerning these issues.

Please be aware that all modification scenarios on real estate loans should be vetted by your legal counsel. Depending a State law and what you may be doing, it might require recording in order to not jeopardize your lien position.

For a non-real estate consumer loan, if the borrower reaches out asking for our deferred payment program, would that be considered a request for credit and require an 'application'? At this point, we are taking requests via email or telephone, documenting their hardship, then offering the program - no questions asked.

If they are currently delinquent - no. If they are not, then you are going to owe them an adverse action notice if you tell them no.

2(c) Adverse action.

Paragraph 2(c)(1)(i).

1. Application for credit. If the applicant applied in accordance with the creditor's procedures, a refusal to refinance or extend the term of a business or other loan is adverse action.

In relation to the current COVID situation and assuming the customer is not delinquent - 1) If a customer requests an extension to the term of their loan (and the request meets the definition of "application"), but we can only offer a payment deferral with no change to the maturity date, we should issue an AAN - true? 2) If the customer only requests the deferral but we cannot offer it, no AAN is needed since it is not a request to extend the term or refinance - true? Thank you!

Are you guys collecting interest or anything thru the date of the payments you are deferring?

We are not.

So are you advancing the amount of interest thru defer date, pay the interest into the negative? Are you recalculating and raising the payment?

No - we are not advancing anything. We are deferring payments, extending the loan 3 months and letting the borrower(s) know there may be a balloon payment at the end - and reminding them how the payments will be applied once the loan goes back into repayment.

To me that makes more sense. Especially not raising the payment in 6 months.

We went back and forth on that one. Also, for loans with escrow we will be doing a short year statement after the loan goes back into repayment and the first payment is made.

We were looking originally at doing this- 6 months rather than 3 months, but all of their payments for the next year or more could be going just to paying off that back-interest plus current interest, resulting in a substantial balloon as compared to the amount of interest originally deferred. This would probably be less of an issue with a smaller deferment period.

We're looking now at either extending, capitalizing the interest, re-amortizing -or- scraping the interest off and holding it in a separate "bucket" until payoff. Still working through the logistics and in discussions with our regulator.

My thinking was most loans don’t last until maturity so the balloon may not be an issue.

For income property loans, we are discussing deferring the P&I payment for 3 months, then adding the deferred/uncollected interest to the loan balance and re-amortizing over the remaining life of the loan. This keeps us from needng to re-record our DOT and update title policy since we're not extending the maturity. But isn't this capitalizing interest? I can't find any regulatory guidance on this, but I have "capitalizing interest" as a big no-no in my memory banks?

Sort of depends on how you interpret Section 4013 of the CARES Act.

Ok, I get it for TDR reporting/determination. I will also confirm with our regulator and accounting firm. Do you know if there is a different answer if the deferral is for a portfolio consumer mortgage?