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38 Cards in this Set
- Front
- Back
Loan Scoping
What types of loans should be scoped at each exam? |
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Classifications
Special Mention |
Not together w/ classifications, but total should be considered in AQ. Should have comments in Report, geared toward correction of weaknesses |
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Classifications
Substandard |
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Classifications
Doubtful |
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Classifications
Loss |
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When should a loan be on nonaccrual? |
90+ past due unless well secured and in process of collection
Reversal of previously accrued but uncollected interest required
Exemption: consumer & residential RE or more stringent State standard |
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When can accrual resume? |
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Express determination letter (so bank can write off 'Loss' loans on taxes) should be issued if: |
New one must be requested/issued at each exam |
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Express determination letter should not be issued if: |
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What should concentration policies consider? |
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What should be used as basis to calculate concentrations? |
(undisbursed loan commitments should not be included in calculation, but address impact in written analysis) |
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Concentration listing requirements:
25% of TC (or Tier 1 for non-loans) |
(less than 25% can be listed if elevated risk) |
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Concentration listing requirements:
100% of TC (or Tier 1 for non-loans) |
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Concentration listing requirements:
Funding source concentrations |
10% of TA: single funding source
25% of TA: aggregate potentially volatile funding sources (brokered, high-rate, uninsured, listing svc, FFP, borrowings, other) |
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Concentration listing requirements:
Written analysis required |
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Three terms basic to secured transactions |
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UCC-1 good for how long? |
5 years
continuations can be filed during the final 6 months |
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Procedure for foreclosing |
1. Repossession of collateral - with or without judicial process. e.g. sheriff seizes collateral under court order 2. Borrower's right to redeem collateral - must pay entire balance plus all repo & holding expenses 3. Bank retains collateral & releases borrower from further liability on the loan - borrower must agree 4. Resale of collateral - public or private. notice to borrower must be given |
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Rule of priority |
General rule that the creditor with the earliest perfected security interest has priority over collateral |
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Exceptions to the rule of priority |
1. Buyer in good faith purchases car from dealer's floor plan line, cutting off prior perfected security interest in car 2. Buyer in good faith purchases TV from another person who bought it on credit, cutting off security interest by doing nothing 3. A creditor who provides additions/improvements on collateral and has perfected security interest in the improvements |
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Types of guarantees |
Payment guaranteed - guarantor will pay if borrower doesn't Collection guaranteed - guarantor will pay only after holder has reduced to judgement a claim against Limited guarantee - relates to a specific loan Continuing guarantee- enforceable for future transactions btwn bank and borrower until revoked |
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Types of bankrupcy |
Liquidation. trustee collects all of debtor's nonexempt property (Chapter 7)
Rehabilitation. debtors retain assets but obligations are restructured and payment plan is implemented. Chapter 11 - available to all debtors. Chapter 13 - individuals w/ regular incomes and unsecured debts under $100M, secured under $350M |
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What is automatic stay? |
Creditors' must stop further actions to collect claims or enforce liens once bankruptcy petition is filed. Stay remains in effect until:
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Two of the most important grounds for termination of stay requests: |
1. debtor has no equity in encumbered property and property is not necessary to an effective rehab plan 2. creditor's interest in secured property is not adequately protected |
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Reaffirmation |
Debtor promise to pay after a bankrupcy discharge. e.g. to avoid foreclosure on a home
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Classes of creditors |
1. Priority creditors - entitled to receive payment prior to any others 2. Secured creditors - secured up to the extent of the value of their collateral 3. Unsecured creditors - last in priority |
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What is difference between syndicated lending and loan participations? |
Lenders in a syndication participate jointly in the origination process, as opposed to one originator selling undivided participation interests to third parties.
Avg syndicated credit is over $100 million |
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Advantages of syndicated credit |
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Phases in a loan syndication |
1. Pre-Launch Process - borrower's needs, due diligence, info analyzed, credit write ups take shape, bids sent. Info memorandum prepared 2. Launch - banks receive info memo. negotiations take place btwn banks and borrower over terms 3. Post-Launch - two week period for potential participants to evaluate transaction 4. Post-Closing - ongoing dialogue with borrower and quarterly credit covenant checks. annual full credit analysis |
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Shared National Credit (SNC) Program |
Interagency initiative administered jointly by FIDC, FRB, and OCC to ensure consistency among three regulators in classification of large syndicated credits |
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Definition of a SNC |
Loan/loan commitment extended to borrower with original amount $20 million or more and shared by three or more unaffiliated banks; or, a portion of which is sold to two or more unaffiliated banks, with purchasing banks assuming pro-rata share of credit risk |
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Subprime lending |
No universal definition. Generally characterized as a lending program that targets borrowers who pose a significantly higher risk of default than traditional retail banking customers.
Can be profitable if well-managed. |
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Subprime lender |
Bank that has a subprime lending program with an aggregate credit exposure of 25% of Tier 1 Capital or more |
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What should a bank that wants to engage in subprime lending have? |
If not properly controlled, can be unsafe & unsound |
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Payday lending |
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Payday loan classifications |
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ROE schedules for adversely classified loans |
Items Subject to Adverse Classification Page Presents pertinent comments related to classified loans
Analysis of Loans Subject to Adverse Classification Page Permints analysis from a source & disposition standpoint. Should be completed in banks with special supervisory problems, or volume/composition of classifications has changed significantly. |
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The documents which allow a bank to sell a debtor's securities collateral are called: |
Stock and bond powers |