I recently completed an audit of our bank's auto loans and noticed that the date on the promissory note (and other loan docs) was not always the same date as the one listed on our bank system. Further investigation and discussions revealed that our loan docs are printed out for the customer to sign at an agreed upon time. However, for some reason or another the customer may not be able to make it in to sign the docs and close the loan that day. So, the loan officers hold on to the pre-printed docs and even if the customer comes in 3 days (or more) later they still have them sign the docs with the prior date on them. The customer receives the disbursement of funds on the date they actually sign the docs. The loan is also not put on the system until the customer signs the docs and receives the funds, so interest does not start to accrue until the docs are signed. The system date reflects the correct note date. Therefore, interest is accrueing correctly. The only problem is that the loan docs state the wrong note date.

Is there any requirement that loan officers re-print loan docs to reflect the correct and "true" note date? The main issue here is that the customer signs and receives paperwork with incorrect dates since obviously the disbursement date and note date on the system are correct. Any thoughts on this...please share them with me. If further clarification is needed, please let me know that as well. Thanks!

I spoke to an attorney who informed me that there could be a Reg Z issue with this practice. That would be if the day the loan docs were signed was a sufficient # of days to cause the disclosed APR to be off more than the tolerance (1/8th of 1%) Otherwise this practice should be OK.

It might be okay (unless Reg Z is an issue), but I wonder if the customers know they are paying for interest prior to signing loan docs. I guess I wouldn't assume that this is a practice that is alright in their eyes. It might be that a procedure change is in order. Just my 2 cents.

The customers don't start paying interest until they receive the funds and sign the docs. For instance the docs may state 5-26-06 because that is the date the customer agreed to come in and sign the docs. Then for some reason they don't make it in to the bank until 5-30-06 to sign the docs and receive the disbursement. So, instead of re-printing the docs so they reflect the correct date of 5-30-06, the bank has the customer sign the old docs dated 5-26-06. In this case, interest would not start accrueing until 5-30-06.

I guess I thought they should all match. When I review files I make sure the date on the system matches the date on the note. Is the origination date on the note adjusted? If the customers are dating it the date it was to be originally funded and the system matches the date they actually came in...how do you know which is right? If the customer is dating it back to 5/26, the file would reflect that is the date the interest should start accruing, right?

That was my first thought too...that all the dates should match. I guess I am going to go with what the lawyer I consulted said and leave it at that. Ideally I would think we would want to have all the same dates...the loan docs, the system, and the disbursement date...but loan officers may not always see it as convenient to re-print all the docs if customers don't make it in to the bank on the date they agreed to come in. As long as there is no problem with interest accrual and Reg Z is not being violated...what other issues can you foresee?

What other documents are the loan officers backdating? Could this be a pattern that is done with HMDA reportable loans? I would watch other loan categories to ensure they are being done accurately. Personally, this would be a policy issue in my mind. I would also check with your external auditors regarding their reporting of the loans. If the loans closed over year end, which date is being used to document funding? If it isn't on the system at year end and yet they date it as such you could have some accounting issues as well as regulatory reporting issues. Would the attorney write you a letter with their opinion? I am not sure I would be comfortable letting this one go as is...but again this is just my opinion and I could be entirely wrong. Inconveniencing the loan officer is minor compared to possible regulatory/accounting issues later down the road.

I agree with you 100% because it would make me feel better to see all the same dates. I will keep an eye out in future loan audits and discuss your point about HMDA reportable loans with our audit staff. In this case, I was talking about auto loans so HMDA wouldn't apply, but who's to say that this isn't happening with RE Loans as well. Also, good point about accounting and regulatory and year-end reporting. What if a large loan came in like you said...right at year-end and it was put on the books for the wrong year. I think it would be a good idea to be on the safe side and re-print the docs. Thanks for your input. I appreciate it!

I don't see this as backdating. It is a matter of printing for the date the closing is planned, but then things change.

What about printing without a date and it gets filled in at closing? Is that possible. Many legal documents are done that way. That way there is no question.

Great idea...Thanks

SC - I have noticed sometimes that dates on the system and dates on the note do not match and write them up as audit exceptions. However, that being said - in your original post you use the example 3 days (maybe just coincidence), but are you sure that these transactions are not subject to rescission? In this case the date of disbursement and the date of the note would be different. Just my first thought as I read your post.

I thought of that but she said they are auto loans!

LOL - I missed that Kaybee - Then I sure hope their not doing a rescission period!

Maybe they are those auto equity loans that were really popular a while back!

Or maybe it was an auto loan audit for loans where the people were going to live in their car?!?

Audit Guy or Kay Bee...
Have you seen similar differing dates at your banks? Do you write them up as exceptions? Do you require your loan officers print out new docs?

When there were pre-dated docs, if there was a date of SIGNATURE vs a date on the top of the document, we went with that on advice of counsel.

For the most part, I am used to banks dating the docs at the time of signing so that you don't end up printing and re-printing and re-printing.