What is the collateral to the Lender?
The risk to the Lender is minimized because they are holding all of the collateral which is their own paper or, (if in a two bank transaction) that of their up line bank. In either case, this very strong security and in the first place, is the Principal Guarantee. Since the Lender uses the funds on deposit from the Trust, the Lending Bank puts up no money in order to facilitate a so-called Deposit Matching Funds – Loan Back or Back-to-Back transaction. Additional collateral is covered later in the package for the debt service hedge.
Related Questions
- I was told that if the debtor pays off the loan and later reborrows from the same lender, using the same collateral, a new financing statement needs to be filed. Is this true?
- Once a bankruptcy is filed by the mortgagee, what are the basic steps for a lender in pursuing the mortgaged collateral or obtaining recovery of the loan?
- May a qualified lender consider a borrower’s treatment of collateral when reviewing a restructuring application?
