TOPIC: Loans

Deferred Payments

EVP at a bank ($110MUSA)
When deferring payments, how are you handling the repayment and/or accrued interest when the payments begin. When payments resume the payments would typically go toward accrued interest first, which would delay any principal payments for another few months (depending on the interest rate of course). So when the payments do begin in 3 (or so) months, how are those applied in your system. 
  • Chief Compliance Officer at a bank ($103MUSA)
    With the Deferment Agreement, we are providing the borrower with a "Sample Schedule of Resumed Payments".  We have an Excel Loan Recalc that calculates.  This way, the borrower should not be surprised that all payments will go to interest for an extended period.  In general, short-term loans on vehicles will catch up with the first payment; however, real estate are looking to take 4-5 payments.  Here is an example.  I'm not able to paste it into this text box with formatting, but hopefully, it shows up appropriately.

    SAMPLE SCHEDULE OF RESUMED PAYMENTS
     
    Current Balance:              $248,798.93 
     
    Date Interest Paid thru:   3/2/2020       Months Skipped:  April 2020, May 2020, June 2020 
    Interest Rate:                  6.00%  
    Payment Amount:          $2,205.63 
    Next Payment Due:        7/5/2020 
     
                       Payment        Payment Applied to            Current          Accrued 
    Date            Amount       Interest        Principal           Balance          Interest 
    3/3/2020    Current Balance:                                   248,798.93   
    7/5/2020    2,205.63      2,205.6300          0.00       248,798.93         2,865.7783 
    8/5/2020    2,205.63      2,205.6300          0.00       248,798.93         1,928.0004 
    9/5/2020     2,205.63      2,205.6300         0.00       248,798.93            990.2225 
    10/5/2020   2,205.63      2,205.6300         0.00       248,798.93              11.5461 
    11/5/2020   2,205.63      1,279.3982      926.23      247,872.70                0.0000