Each institution shall employ the following practices with respect to application of cash payments on nonaccrual loans:
If the ultimate collectibility of the recorded investment, in whole or in part, is in doubt, any payment received on such loan shall be applied to reduce the recorded investment to the extent necessary to eliminate such doubt.
Once the ultimate collectibility of the recorded investment is no longer in doubt, payments received in cash on such loan may qualify for recognition as interest income if all of the following characteristics are met at the time the payment is received:
The loan does not have a remaining unrecovered prior chargeoff associated with it, except in cases where the prior chargeoff was taken as part of a formal restructuring of the loan;
The payment received has come from a source of repayment detailed in the plan of collection;
The loan, after considering the payment, is not contractually past due more than 90 days and is not expected to become 90 days past due, or a repayment pattern has been established that reasonably demonstrates future repayment capacity.
The institution shall employ the following practices with respect to earned but uncollected interest income on loans, leases, contracts, and similar assets that are determined not to be fully collectible:
Earned but uncollected interest income that was accrued in the current fiscal year and is determined to be uncollectible shall be reversed from interest income; and
Earned but uncollected interest income that was accrued in prior fiscal years and is determined to be uncollectible shall be charged off against the allowance for loan losses.
Copyright ©2024 LegalFix. All rights reserved. LegalFix is not a law firm, is not licensed to practice law, and does not provide legal advice, services, or representation. The information on this website is an overview of the legal plans you can purchase—or that may be provided by your employer as an employee benefit or by your credit union or other membership group as a membership benefit.
LegalFix provides its members with easy access to affordable legal services through a network of independent law firms. LegalFix, its corporate entity, and its officers, directors, employees, agents, and contractors do not provide legal advice, services, or representation—directly or indirectly.
The articles and information on the site are not legal advice and should not be relied upon—they are for information purposes only. You should become a LegalFix member to get legal services from one of our network law firms.
You should not disclose confidential or potentially incriminating information to LegalFix—you should only communicate such information to your network law firm.
The benefits and legal services described in the LegalFix legal plans are not always available in all states or with all plans. See the legal plan Benefit Overview and the more comprehensive legal plan contract during checkout for coverage details in your state.
Use of this website, the purchase of legal plans, and access to the LegalFix networks of law firms are subject to the LegalFix Terms of Service and Privacy Policy.