ments other than fully amortizing payments. However, as explained
in Comment 1 to this section, this reference to Regulation Z is limited
to those definitions and has nothing to do with whether the loan is
a Regulation Z covered loan, i.e., a consumer loan, or the property a
“dwelling” as defined in Regulation Z’s §1026.2(a)( 19). The example
in Regulation C’s comment to §1003.4(a)( 27) assumes that a financial
institution originates a business-purpose transaction that is exempt
from Regulation Z to finance the purchase of a multifamily dwelling
and that there is a balloon payment, as defined by Regulation Z, at the
end of the loan term. The multifamily dwelling is a dwelling under
Regulation C’s §1003.2(f) but not under Regulation Z’s §1026.2(a)( 19).
In this example, the financial institution should report the business-purpose transaction as having a balloon payment under §1003.4(a)( 27)
(i), assuming the other requirements of this part are met. Aside from
these distinctions, financial institutions may rely on the definitions and
related commentary provided in the appropriate sections of Regulation
Z referenced in §1003.4(a)( 27) of this part in determining whether the
contractual feature should be reported.
QIs a bank required to collect beneficial ownership information on corporate guarantors?
AThe beneficial ownership regulation does not address guarantors. A guarantor only has what is called a “contingent” relationship and
is not obligated to make any payments until the borrower defaults and is
unable to satisfy the outstanding balance. Thus, a bank would not need
the guarantor’s beneficial ownership information until and unless the
original loan goes into default.
At that time, the guarantor takes the place of the borrower and would
become the principal on the loan and the bank would need the beneficial ownership information. Knowing that a workout situation can be an
awkward time to collect beneficial ownership information, some banks
are collecting the beneficial ownership information on guarantors at the
time the loan is made so they have it on file in the event of a default even
though it is not required. If the bank does collect the information as part
of the original loan documentation, it would need to reaffirm that the information is still correct when the loan goes into default. (Response
provided September, 2018) ■
ABOUT THE AUTHORS
LESLIE CALLAWAY, CRCM,
CAMS, CAFP, Director of
Compliance Outreach and
Development, along with
managers MARK KRUHM,
CRCM, CAFP, and RHONDA CASTANEDA, CRCM, serve as a compliance
resource for ABA member banks. Among other managerial duties, the team is
responsible for manning ABA’s Compliance Hotline, serving on compliance
committees, and providing content and guidance for ABA courses.
Have a question? Email email@example.com or call (800) 551-2572.
Answers do not provide, nor are they substitutes for, professional legal advice.
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