Back Dating a loan

Lender recently discovered (don't ask) that he forgot to renew a loan from last May. He now wants to do a note dated 5/08, maturing 5/09 and then have the customer sign another note (at the same time dated 5/09-5/10. I don't think we can do this, but I'm not sure why. The customer is ok with it.

What compliance/S&S issues do you see with this?

I'm sure the borrower is "OK" with it right now. He/She probably has a credit reporting problem with it. That also brings to the point...didn't this loan show up delq.?

I've had a LO in my past who did this very thing. It bit him when he ended up in court and the borrower told the judge when he REALLY signed the note.

My suggestion is just to renew it effectively now.

Ditto on the back dating. Own up to the current unpaid loan and move on. This type of action could cause questions on so many other issues. WHat should be believed and what shouldn't?

A transaction nunc pro tunc is never wise in lending.

Just have the customer pay interest to May 24, 2009. Date your renewal note May 24, 2009 to whatever you want for a maturity date.

Why wait till May? Have the customer pay the interest current and do a new note TODAY!

And if the LO is already planning a renewal, why not just write it for a longer term? Make it a balloon note so the onus falls on the borrower to renegotiate, not the LO to remember.

Sounds like there are some very serious internal control problems within your institution if a loan can have matured in May 2008 and there is nothing showing on your past due reports. How did this happen? Who booked the loan or modified the maturity date on the system to by-pass past due controls? Has the borrower been making payments all along? This sounds like a tip of an iceberg problem and back dating documents is not the solution.

I agree with the last Anon's sentiments. This has the potential of "fraud" written all over it. Someone definitely needs to be investigating how this loan missed all your internal controls for maturing notes and/or delinquent notes starting with the loan officer and progressing from there to persons that have the ability to perform maintenance on the account. Someone definitely messed up whether it was intentionally or unintentionally.

This does not sound right at all. Why are they signing for the wrong date if the lender wants it back dated for another date? I don't think that can be done anyway. If it can be done, the old one will be archived somewhere so they might as well not do that. Auditors will shut them down.