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Loan Expenses After Note is Closed: How to Charge

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Question: 
Our lenders are wondering if any expenses on a loan after the note is closed can be charged to the principal balance? For example, a slow pay customer can't pay property taxes and the bank pays them for him. Can that be charged to the principal balance as an advance? I said no, due to the fact that would trigger a payment difference, needing new disclosures. The other example was the loan is in default and the process of foreclosure has started. There are attorney fees that are accessed during that process. Can those be charge to the principal balance and claimed in the debt owed at the time of foreclosure/charge off?
Answer: 

Read your contract (note and security agreement) and consult your legal counsel. Most likely this can't be done without a modification, but may vary in accordance with state law and contract terms.

First published on 12/02/2018

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