If a customer changes from a Corporation (Inc) to an LLC do new loan documents need to be prepared?
Currently, the bank I am employed by uses commercial loan applications. In my prior work lives, the banks never had a specific cmmercial loan application. Are they required? I realize some compliance related items are collected on them; but believe this could be done in another manner. Thoughts on this topic and why you would recommend keeping them or eliminating them.
Our bank recently added an Equipment Finance division and I am wondering if an Adverse Action Notice needs to be sent either to the vendor or the business working with the vendor applying for credit?
We had an auditor tell us that we needed to get the signers of an LLC to initial the "Joint Application for Credit" where the LLC is the only borrower. We disagree with that. There should not be a Joint Application for Credit for this loan. Has anyone else had this problem? What's the best way to handle the auditor and the loan?
Pertaining to large corporate secondary market participation / syndication loan questions: What time frames, waivers, or legal letters are reasonable / acceptable regarding BSA compliance, specifically, CIP and CDD Beneficial Ownership Forms, when purchasing a share of a large corporate (not consumer or mortgage loans) participation / syndication loan a few years after its origination (secondary market)?
For example: Purchasing a 3.7% share ($20 million) in an existing ($550 million originally) syndicated corporate (not consumer or mortgage loans) secured term loan for publicly traded and non-publicly traded corporations. The loans are purchased in the secondary market through attorneys and agented by global investment banks such as Credit Suisse Group AG. Some syndicated loans have more than 80 borrowers with more than 100 banks that participate in the loan. Further, our bank is not a Legal Bank of Record for the loan until our initial Funding Date (years after the loan originated) and therefore we cannot request and are not provided with any BSA required documentation such as Beneficial Ownership Forms, and CIP Documents for numerous borrowers, or non-BSA documentation such as Organization Documents, prior to the Funding Date. Typically, it takes 90+ days to receive Beneficial Ownership Forms, CIP information, etc., after the Funding Date, and in some instances, we aren’t provided with some requested documentation at all.
What are reasonable / acceptable timeframes for collection of Beneficial Ownership Forms, CIP, etc. that we can specify in our BSA Policy for these specific syndication loans? Is 90 – 180 days acceptable? If we specify a shorter timeframe we would constantly be up against the due dates, or past due, causing BSA policy exceptions / violations, which we want to avoid. Is it acceptable to obtain only the main borrower’s Beneficial Ownership Forms and CIP?
Alternatively, is it acceptable to create and utilize a standard legal letter signed / certified by the agent bank or attorney that managed the transaction stating that they have in their possession, and thoroughly reviewed for adherence to Regulatory Requirements, specific documents, and information, such as CIP for guarantors, Beneficial Ownership documents, or other BSA or Compliance related documents? Additionally, the legal letter would include a statement that they agree to provide documents or information should the need arise for audit or examination purposes or in the event of a triggering event when the bank would be required to complete enhanced due diligence. Would we be subject to regulatory criticism in either of those processes?
Regarding the new small business data reporting requirement expected to come out soon. Will this "1071" requirement be similar to HMDA and CRA whereby if it’s HMDA it cannot be reported as CRA? So if it’s a HMDA reportable loan, then we won't report it for the small business data?
When doing a commercial loan that is secured by stock, would you include that value when calculating the CLTV?
My bank is in Texas. When an entity like an LLC is registered in a state other than where the bank is and wants to open deposit accounts and loans, should it be registered in our state or otherwise be "officially" registered here in some way? Does it make a difference if the owner lives in the bank's state?
Participation and LIFO Loans
On an existing commercial loan, can you add new money as long as the amount doesnt exceed the original loan amount? For example, an original loan was $74,000 with a current balance of $64,000, may we add-on $2,000 in new money. The maturity date and interest rate will remain the same