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I’m part of a small committee that is to determine when our bank has a request for credit/application. It becomes a little sticky once the loan has been originated (primarily as it relates to commercial loans)
I’d like to post my conclusion and receive feedback, either validating those thoughts or poke holes in them please.An initial request once it’s moved past an inquiry is a request for credit.
Based on Reg B’s definition of credit “the right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer it’s payment or purchase of property or services and defer payment therefor”; I conclude the following:
• A loan renewal is an application for credit as the borrower is asking to utilize funds and defer payment
• An extension is an application for credit as the borrower is asking to defer payment on funds already borrowed.
• A modification (change in payment date, amount, interest rate, collateral, addition or subtraction of guarantor) is a request for credit in that it requires a decision from the lender and is changing the terms of the deferred debt. If the lender denies the request to modify, there is inherently a request.One carve-out to this would be an administrative extension. Example: loan matures Nov 1. Borrowers apply for a loan renewal, NOI sent requesting X, Y and Z. These items are not able to be provided by the maturity date, so the lender offers to extend the loan for in order to facilitate the request to renew. The applicant isn’t asking to extend but the lender is offering in conjunction with the application to renew.
Feedback please and thank you…
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