[lumullins1121]

There is a bit of a debate within our bank about this situation. In an Indirect Lending audit it was noticed that the principal and Interest payment on some loans was different than what the amortization tool we use suggests it should be. After doing research it was determined that this happens on our loans with have a first payment date 45 days after closing. Most of our loans have a first payment date 30 days after closing. We discovered that the difference in the payment is made up of the 15 days Odd Days Interest amortized over the life of the loan. So essentially we are charging interest on that 15 days of interest. Is this an issue in your opinion?

[Brent V]

This may be a problem. Typically odd days interest is paid at closing or there is a larger initial payment. Does your note form state that the odd days interest is added to the principal and amortized over the life of the loan?

[lumullins1121]

We have this language disclosed on the Note in the Payment section:
“Any accrued interest not paid when due is added to the principal and thereafter will accrue interest as principal.”

Do you think we would be covered with this?

[jholzknecht]

If you told the borrower that the odd days interest was due at closing and they did not pay when due, then this language would be helpful. I afraid it is still lacking.

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