Borrower from Another State-Note from Bank State?

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Question:

We are a small community bank and have a loan opportunity across state lines. We have never loaned outside our lending radius. We were wondering if the borrower is in one state and we are in another, do we use the note for the other state and not our state?

Answer:

You really need to consult your attorney since the use of the wrong loan documents will jeopardize your legal capacity to collect the debt.

Generally the note is specific to the state the debt is being originated in and the security agreement is specific to the state where the collateral is located, but again I emphasize you need to speak to your attorney.

First published on BankersOnline.com 5/21/12