Situation, when a loan balance is "upside down" with the current value of the collateral, in this case mobile homes, and the original amount financed is less than the current loan balance. the loans originated in 1995 and 1996 and usually a 180 payment term. the required payments are for the most part slow now, but not in excess of 90 days. Hazard insurance is force placed onto the loan balance.

Does this situation require a write down of the loan balance to the current collateral value?

Have studied the FDIC uniform Retail Credit Classification and Account Management Policy for an answer. It seems that eventually the loan could possibly pay out, but years after the maturity. If the collateral were to be sold, the bank would definitely suffer a loss. What is the answer, take a loss now, or wait until the borrower stops performance altogether?