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Latest Lending - Interest Topics

Service Provider for Mortgage Loans-HELOC

04/05/2020

XYZ is our service provider for mortgage loans. They are telling us that there is no way to split out the daily interest to only calculate it based on the initial draw at closing. The system is going to calculate interest owed on the total available balance of the HELOC. Our core provider cannot charge prepaid interest on the full amount of a HELOC, just the total of the first advance. So they are both different and it does not seem permissible to charge a customer money on something they have not borrowed yet. Please let me know if XYZ can even accrue on the full amount?

Charge Interest on Interest Balance of Charge-Off?

01/27/2019

We have a customer with whom we charged off a loan and interest accrued. The principal balance is now paid and the customer is paying the interest. Can we charge interest on the interest balance of a charge-off loan?

Finance Unpaid Interest Accrued- Renewal loan

02/11/2018

On a renewal loan (a loan that has matured that is already on the books),. can you finance the unpaid interest that has accrued on the loan you are renewing? What is the answer if you change the loan number and if you don't if there is a difference. I have received conflicting answers on this and would like to know if it is a violation if you roll the unpaid interest in on a note that you are renewing.

Simple Interest Method for LOCs

05/25/2015

We have several consumer LOCs where the note states average daily balance is calculated using the simple interest method. Our system charged interest on interest. What steps do we take to correct?

Protecting Lenders' Interests in Aircraft, Engines, Propellers and Spare Parts

09/23/2013

When it is necessary or desirable to perfect security interests in aircraft, engines, propellers or spare parts in the United States a lender must consider a multitude of issues. For many lenders and their counsel the process of recording instruments with the Federal Aviation Administration (the "FAA") and registering aircraft in the United States needlessly remains a mystery. The following is an explanation of the most critical issues a lender must address to ensure that documents submitted to the FAA will be accepted for recording.

FAA Security Agreement for Destroyed Engine

07/01/2013

We currently have an FAA Security Agreement for the plane and the engine, however, the engine listed was destroyed. A new engine needs to be added. Does a new Security agreement need to be prepared or an amendment to the original?

Use UCC As a Security Agreement?

06/24/2013

I have a note that references a Security Agreement but there is no Security Agreement attached. Instead there is a UCC that is being use as a Security Agreement. Is this okay, or should there also be a Security Agreement that references the UCC?

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Lender's Title Policy Coverage

04/05/2020

If we have a loan for $7 million with collateral being commercial properties valued at $3 million, UCCs, and assignment of publication rights, what should our Lender's Title Policy coverage be? These commercial properties are in PA & NY. We have requested a Lender's Policy for $7 million, however, the attorney is stating that he can only insure up to the "fair market value" which I've never heard in my 20 years of banking. So what is the rule on how much of a Lender's Policy can we get?

Service Provider for Mortgage Loans-HELOC

04/05/2020

XYZ is our service provider for mortgage loans. They are telling us that there is no way to split out the daily interest to only calculate it based on the initial draw at closing. The system is going to calculate interest owed on the total available balance of the HELOC. Our core provider cannot charge prepaid interest on the full amount of a HELOC, just the total of the first advance. So they are both different and it does not seem permissible to charge a customer money on something they have not borrowed yet. Please let me know if XYZ can even accrue on the full amount?

Private Flood Insurance Policy for 2 Buildings

04/05/2020

We have a marina loan for $1.2MM with two buildings to house boats. They have a private flood insurance policy for both buildings on one policy instead of one policy per building. Is that possible since its a private policy and not NFIP?

Borrower Passes Away: Charge-off Entire Balance?

04/05/2020

When we have a loan secured by real estate and the borrower has passes away, should the entire loan balance be charged-off, or just the amount above fair market value less cost to sell? Should the remaining balance be classified Substandard and moved to OREO?

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