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Written by: Tim Veal The following overlooked paragraph in the new Policy Statement on Prudent Commercial Real Estate Loan Workouts may be an opportunity for banks to reduce classified assets in the near term! A restructuring may involve a multiple note structure in which, for example, a troubled loan is restructured into two notes. Lenders may separate a portion of the current outstanding debt into a new legally enforceable note (i.e., the first note) that is reasonable assured of repayment and performance according to prudently modified terms. This note may be placed back on accrual status in certain situation. In returning the loan to accrual status, sustained historical payment performance for a reasonable time prior to the restructuring may be taken into account. The portion of the debt that is not reasonable assured of repayment (i.e., the second note) should be adversely classified and charged-off as appropriate. Please contact us to discuss this area in greater detail.
Contact Nichols, Cauley & Associates by Email, phone, or online form with your questions. Site visitors should keep in mind that the content is generally designed to be of general applicability. Particular state laws, regulations and special contractual provisions can greatly impact rights, responsibilities and legal obligations. Only a competent attorney, accountant or other professional looking at all the pertinent facts and circumstances of a particular situation can provide definitive guidance for you. Please refer to our important legal discalimer which can be accessed from the bottom of any BankAudit.net webpage.
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