files lines of authority detailing who is responsible for maintaining and

Files lines of authority detailing who is responsible

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files, lines of authority detailing who is responsible for maintaining and reviewing the institution’s credit files, guidelines for taking, evaluating, and perfecting loan collateral, procedures for setting loan rates and fees and the terms for repayment of loans, and a statement of quality standards applicable to all loans, statement of the preferred upper limit for total loans outstanding, description of the lending institution’s principal trade area, from which most loans should come, procedures for detecting and working out problem loan situations. 16-8. What are the typical steps followed in receiving a loan request from a customer?
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A loan officer usually takes or receives such a request initially and passes it along to the credit analysis division for technical review. Usually the recommendations of both the credit analyst and the loan officer are directed to a loan supervisor or loan committee for approval. 16-9. What three major questions or issues must a lender consider in evaluating nearly all loan requests? The three key issues with every loan: 1. Is the borrower creditworthy? 2. Can the loan agreement be properly structured and documented? 3. Can the lender perfect its claim against the borrower's earnings and any assets that may be pledged as collateral? 16-10. Explain the meaning of the following terms: character, capacity, cash, collateral, conditions, and control? a. Character -- is the borrower specific about the purpose of a loan and has a serious intent to repay? b. Capacity -- does the borrower have the legal authority to sign and commit to a binding loan agreement? c. Capital -- does the borrower generate sufficient income or cash flow to properly service a loan? d. Collateral -- does the borrower possess assets of sufficient quality and value to backstop a loan? e. Conditions -- does the outlook for the economy and industry where a borrower is situated add strength to a loan? f. Control -- does the proposed loan meet the bank's own quality standards and the standards of bank examiners? 16-12. What sources of information are available today that loan officers and credit analysts can use in evaluating a customer loan application? Among the most widely used sources of information used in evaluating loans are financial statements supplied by the borrower and industry-wide performance ratios for comparison purposes supplied by such organizations as Dun and Bradstreet and Risk Management Associates (RMA). To exchange credit information among business lending institutions and to organize conferences and publish educational materials to help train loan officers and credit analysts. 16-13. What are the principal parts of a loan agreement? What is each part designed to do? The most important parts of loan agreements include a signed note which specifies the interest rate and the terms of the loan, a listing of covenants which specify what the borrower must and must not do, documents specifying loan collateral which protects the lender’s interests, and a section describing what events or happenings will trigger default.
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  • Fall '16
  • Thu Trang
  • Debt, Financial services, Mortgage loan, Deposit account

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