What would you do?...

Situation: A corporation loan with four personal guarantors. The four personal guarantors are paying the monthly payments- 25% each. One guarantor is now on active duty. From everything I have read and researched, that the 6% rate reduction and payment reduction must be completed automatically for the entire loan transaction not just the portion of that relates to the active military member. The other three guarantors will benefit from the last member being in the military.

Would you...
1. Reduce the rate and payment for the entire loan transaction.
2. Seek legal counsel to make a case for not complying to SSCRA.
3. Modify the loan contract for the active military member and leave contract terms intact for three other personal guarantors.

I will not give my opinion at this time. I am wanting suggestions from my peers.

Thanks.

I pick number 1. I don't think that this is something you want to mess with!

Your research is correct. You have to reduce the rate on the entire loan amount to 6%, including all fees, and reduce the payments accordingly. SSCRA applies to a loan where the service member has indirect liability, as in the case of a guarantee. The statute does not permit sectioning the liability in the manner you describe.

I would take option 1. You made one note to all four, therefore, any one of them brings the loan under SSCRA. With loan rates what they are today, it is not worth the legal expense and bad PR that you would get.

Rates keep going in this direction and this will be a non-event.

You have to do 1. If this is a significant impact, or you otherwise want to break new ground, back yourself up with 2 and let us know how it goes.

You have option 3 there. I assume you have one note? If one of the four didn't pay, what would you do? You'd tell the other 3 to pony up with the full payment. That is one reason they get protection. It is a double-edged sword. If you have 4 notes, you may only have to adjust the one.

My comment deleted. Upon further review, I found it inappropriate.

2 questions, how do you get him back, and what will the other 3 think when you release one?

Upon further review, I found my comment inappropriate and have deleted.

Bite the bullet on this one. In the long run the alternatives may prove more expensive than the lost interest income when applying SSRA.

I recommend you calculate the actual difference in income between the original and revised rate. Sometimes the actual dollar amount is not as bad as the difference in rate sounds.

The law says you have to do it, so find a way to use the rate reduction as a PR coup for the bank, rather than a customer coup about how I stuck it to the bank.

Excellent reply Don! Sometimes we have a difficult time seeing the simple answer.