I have recent Q&As from two different Beneficial Ownership webinars.
One says loan modifications are not a triggering event for Beneficial Ownership requirements but the other cites a FinCEN clarification and states that a loan modification is a triggering event.
What say you?

We consider a loan "renewal" (maturity date extended) to be a triggering event. However, a loan "modification" (interest rate change, collateral swap, etc.) isn't a triggering event, IMO. Not sure if that's correct, so I'm interested in hearing from the gurus.....

What's a loan modification - an extension of maturity? That would be a renewal and require it.

I was thinking a modification would be a change in terms ( change in rate, payment date, collateral)

I tend to agree that a change to the interest rate, payment date or collateral would not be a triggering event as none of these equates to "renewing" the loan; however, you need to decide this for your bank and articulate it in your procedures.

If you wanted to be conservative, you could say that any event that results in the borrower signing a new agreement would be a triggering event.

That "renewal" and "modification" have no agreed upon meanings and FinCEN is not going to resolve the issue because there are few former bankers on their staff and they don't have a clue.

Accordingly, it will be left to safety and soundness examiners (people who are qualified to have an opinion) to judge one instance at a time. Also, that those who want to use one of those labels to avoid getting a new Appendix A or, alternatively, a simple verbal or written acknowledgement that BO has not changed, are wasting more time in avoidance than compliance would have consumed.

I like that, TtC, "signing a new agreement..." as a triggering event. Otherwise, the Lenders will be wasting a lot of time.

Lenders here go through extensions (defined as 90 days or less) like they go through coffee. Most frequently, those 90 days are used for the borrower to get their accountants & tax guys to update financial info, do inventory, etc. BEFORE they get their loan modified, renewed, or refinanced. Thinking about any consequences to skipping the former (because nothing changed but the maturity) but triggering on the latter.

BEFORE they get their loan modified, renewed, or refinanced.

How is extending a loan for 90 days not modifying the loan? I would be in Ken's camp - trying to define something that is undefined creates a risk that a bank just can't afford. You don't need or want a fifth pillar violation as any sort of subsequent pillar violation has some pretty serious consequences.

The P&P says loan extensions (same rate, same terms, same borrowers) are 90 days or less. Except for the maturity change, the terms of the original obligation, including all agreements evidenced or securing the obligations, remain unchanged and in full force and effect. Not much risk there.

At the end of any extension, something has to happen: renewal, refinance, payoff (often w/ a new loan) -- also defined events that should trigger (re)Cert of BO. Modification of any type will also trigger it.

So the advice is to treat every loan event as a trigger to (re)Certify BO even though the 2005 FAQs, the FinCEN Final Rule, and the last FAQs all use the term RENEW and RENEWAL (loan terms I know) but do not use the terms modify or modifying. And then there's the fact FinCEN uses terms it hasn't defined, won't probably issue any more clarification, and is clueless. That's a great environment for setting up changes in policy & procedure.

CountryBanker,

Are you saying that when a loan matures, it can be extended without the customer signing an agreement for 90 days?

Also what is "The P&P"?

There's a form signed for it, T2C, but it could be mailed, signed & returned. Might be f-2-f mtg, might be left at the front desk ("hey, Bob's coming in to sign that extension..."). Not always as straightforward as I'd like it to be, but there's a much higher percentage of f-2-f when the loan is renewed, refinanced, etc. That's why I'm looking at the consequences of getting the first C of BO then, and expect better results at that time than including a form the customer has never seen before in a packet with other loan docs.

Because the Reg says "when it renews..."

P&P is Policy & Procedure (or Process). At least I've been able to win a battle & change behaviors when it comes to extensions (<= 90 days) vs. renewals (1 yr or more). It used to be called whatever they wanted (e.g., a 1-yr extension).

So what you are saying is that you are hanging your hat on the fact that renewing a current loan for 90-days is not a renewal of the loan. Good luck with that approach.......

You have a matured loan. You extend it using an agreement. Per FinCEN that is your opportunity to obtain a CBO. Period.

As Randy said, good luck with that approach. I think you are taking a big risk.

All the terminology being discussed is not relevant. It will mean different things at different institutions. Focus on the fact that you are having the borrower sign an agreement. Makes no difference what the time period is (60 days, 90 days......).

We are adding the "I agree to notify the bank of any change to such information so long as the loan account is outstanding." verbiage to the Certification Form that will be completed for every loan starting next week. That way, it doesn't matter what the triggering event is called (renewal/modification/change in terms), a new Certification Form will not be required.

Bumping - not sure I interpret everyone here. Is the general consensus that if a customer has to sign documents (whether modification, extension, etc) then you ARE getting BO info and if they are not, then you are NOT?

Are you suggesting that you would do any of those things WITHOUT a signed agreement?