We are getting ready to start using forebearance agreements for our workout and non-accrual loans. We will be forebearing all the interest during the non-accrual period to the end of the loan. My question concerns loans that we are refinancing into a new loan.
For example we have a loan with a principal balance $100,000 and they also have a balance of $10,000 of accrued interest for a total payoff of $110,000. Our new loan would be for the $100,000 balance and we would have a seperate forebearance agreement for the outstanding $10,000 worth of interest due at the end of the loan. My concern is that we are saying to the customer you stills owe us $110,000 but we are only disclosing the APR, payment, etc based on the $100,000?? I just wanted to make sure compliance wise we would be okay or if there is any guidance on the above?
I agree with your concerns. We think you should either do a refi for the full amount owed ($110,000) or do two new notes – one a regular $100,000 refi and then a second $10,000 refi with no interest accrual until some date in the future. Either of these would make for a cleaner and more properly disclosed transaction.