lesson 5 (Credit & collection)

• Underwriting is an important step in the loan approval process.
• Loan Packaging involves the collection of all items necessary for the lender to decide to give or not give a loan, including information on the prospective borrower and the property.
• Loan Approval is the formal authorization to get a loan, usually from a bank.
• Factors to consider in structuring the terms and conditions of a credit transaction include the Fund matching principle, flexibility and responsiveness to the specific situation of the client, common sense and good judgment, clearly stated structure of the credit package, and support by the required approvals.
• Loan Documentation and Disbursement involves the collection of necessary legal documents prior to the initial release/restructuring or availment, serving as witness to the signing of all legal documents, maintaining specimen signatures of all signatories, and using standard loan and collateral documents as evidences of indebtedness or to provide support to credit extensions.
• Principal Credit/Lending Documents include the Loan/Line Agreement, Receivables Financing/Discounting Line/Agreement, Restructuring Agreement, Promissory Note, and Disclosure Statement.
• Collateral/Security Documents include the Real Estate Mortgage (REM) and Mortgage Trust Indenture (MTI).
• Credit File Maintenance involves referring to all the documents that are related to the account.
• Prompt Payment of Accounts is a major area of account monitoring.
• All availment documents have been signed by the borrower, and signed by the account officer as witness and other documents duly authenticated.
• Loan administration processes and workflows vary based on the footprint of the bank and the technology each financial institution uses to support these duties.
• Borrower has no past due availment.
• Appraisal/Inspection of Collateral is a major area of account monitoring.
• A credit folder must be set up and maintained for each borrower for the immediate reference and guide.
• Releases may be made in the following manner: One-time/lump sum release or Partial release.
• Periodic Submission of Requirements is a major area of account monitoring.
• Joint and Several Signatures (JSS)/Comprehensive Surety Agreement binds the key officers and management solidarity or severally with the principal borrower making them liable in case of default/non-payment due to misappropriation, fraud, mismanagement, etc.
• Account Monitoring and Credit Administration involves proper provision of credit support, control systems and other practices necessary to manage outstanding risk assets.
• Past due obligations should be promptly handled.
• Borrowers with outstanding credit facilities or availments should submit the documents that are required on a periodic basis, as stipulated in the loan agreement.
• Amount to be released will not exceed the approved credit limit or in accordance with the approved schedule of releases.
• All outstanding credit obligations should be monitored closely to ensure prompt payment at the prescribed due date of the loan, interest and any other charges or expenses associated with the transaction.
• Industry and market developments should be regularly monitored and the impact of any development in the industry on the credit account should be evaluated.
• Prior to the release or availment, the following conditions should be met: all pre-release requirements and conditions have been complied with and proper legal documentation has been completed including the registration of mortgage documents with appropriate registrars.
• Compliance to Terms and Conditions is a major area of account monitoring.
• Chattel Mortgage (CM) is similar to REM except that the subject is chattel or personal property.
• The credit line has not expired or has not been exceeded.
• All credit facilities must be monitored periodically to ensure compliance with key covenants, repayment schedule, and other terms and conditions governing the facility.
• Collection of Past Due Obligations is a major area of account monitoring.
• All original documents related to each availment should be reviewed and maintained.
• All photocopied documents submitted by the client should be stamped “certified
• Compliance with Key Covenants is a major area of account monitoring.
• Manner of Availment documents provide a financial record of each event or activity, and therefore ensure the accuracy and completeness of transactions.
• Assignment of Receivables is a bilateral contract whereby one person transmits to another his rights, title, interests and actions against a third person either by way of payment or as a security.
• Releases should pass through different authorized signatories.
• Exceptions, deviations or deferrals from standard terms and conditions should be subject to approval.
• Monitoring of Industry Situation is a major area of account monitoring.
• Collection of Loan Amortization is a major area of account monitoring.
• Loan Administration is a broad topic in banking that generally involves determining loan eligibility, tracking loan documentation, and generating reports.