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#2192311 - 09/12/18 03:16 PM Simultaneous Subordinate Financing
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Diamond Poster
Joined: Nov 2008
Posts: 1,107
In the mountains
We have a refinance that also includes simultaneous subordinate financing.

On the CD in the Payoffs and Payments table -
>On the first lien transaction we disclosed -
> Bank Name loan # XXXXX amount $105,157.78 - which consists of the complete payoff of the loan being refinanced
> Bank Name loan # XXXXX (from LN # YYYYYY for deferred interest portion) amount -$22,516.50 - which is the loan number and amount of the simultaneous subordinate loan

On the CD in the Payoffs and Payment table -
> On the subordinate lien transaction we disclosed -
> Bank name loan # XXXXX - Deferred Interest Portion amount $22,516.50

Is this the correct way to disclose and describe this type of transaction on the CD?
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#2192389 - 09/12/18 10:23 PM Re: Simultaneous Subordinate Financing Likes to Comply
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
What is a Deferred Interest Portion??
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#2192475 - 09/13/18 05:45 PM Re: Simultaneous Subordinate Financing Likes to Comply
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Diamond Poster
Joined: Nov 2008
Posts: 1,107
In the mountains
I hope I will explain this correctly, this is how it has been explained to me...

Existing loan is up for renewal; during its last term, it was placed on a non-accrual status. Now the loan is no longer a workout and can now be treated as a “regular” transaction but the customer cannot pay off the nonaccrual, or deferred, interest. However, the borrower is willing to establish a repayment plan. To document this repayment plan, we will originate two loans to replace the “old” loan. The first will be for the principal (primary loan), the other will be a 0% interest rate for the nonaccrual, or deferred, interest.

The reason we do this is because in TN we do not have to forgive the interest that is accumulating on a loan when it is in nonaccrual status. If the customer is unable to pay it outright, we will allow monthly payments for payback but will not include it in the primary loan so that we do not earn interest on top of that deferred interest.

Does that help?
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