Loan Problem Identification Process

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What is the least desirable approach for handling a problem loan according to the text?

Staying with the account 'no matter what' (correct)

Using legal counsel judiciously

Having a senior level task force assigned

Selecting counsel for legal advice, not transaction structuring

Which aspect should be reviewed to gain insight into the ability of the account manager to handle a workout?

Legal vulnerability or advantage

Financial statements

Relationship between account manager and borrower (correct)

Correspondence revealing communication problems

What is important when using legal counsel for dealing with problem loans?

Lack of need for legal counsel in workout situations

High cost of legal counsel

Selecting counsel for providing legal advice only (correct)

Choosing counsel based on transaction structuring ability

What does a senior level task force provide in handling problem loans?

A decision-making body for quick handling Signup and view all the answers

In gathering information about problem loans, what can correspondence reveal?

Communication problems Signup and view all the answers

What is the most important tool in detecting a problem loan?

Monitoring the borrower's account for frequent overdrafts Signup and view all the answers

What may late statements from a company indicate?

Delayed production because of bad news to report Signup and view all the answers

What should you do if a company provides late statements or information?

Extend the time for compliance or suggest changes in reporting requirements Signup and view all the answers

Why are frequent overdrafts considered a warning sign of company problems?

They signal deterioration in the company’s cash position Signup and view all the answers

How should an analyst respond when faced with late statements from a borrower?

Extend the time for compliance or suggest changes in reporting requirements Signup and view all the answers

Which of the following is NOT a potential warning sign that a loan may become problematic?

The company has been consistently meeting all loan covenants Signup and view all the answers

If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest?

The borrower is facing severe financial distress Signup and view all the answers

Which of the following is NOT a recommended step when identifying and developing strategies for problem loans?

Initiate legal proceedings against the borrower immediately Signup and view all the answers

When dealing with a problem loan, what should the lender do first?

Gather additional information to understand the root causes Signup and view all the answers

What is the primary reason for identifying potential problem loans early?

To increase the chances of successfully resolving the problem Signup and view all the answers

Which of the following is NOT a nonfinancial cause of company problems mentioned in the text?

Cash flow problems Signup and view all the answers

Which of the following actions could be taken when a warning sign appears regarding a borrower's ability to pay taxes?

Require the borrower to make tax payments directly to the lender and supply a receipt Signup and view all the answers

Which of the following is NOT mentioned in the text as a potential warning sign of deteriorating relationships between a company and its suppliers?

The company has a history of switching suppliers frequently Signup and view all the answers

Which of the following questions should be considered when developing strategies for a problem loan?

All of the above Signup and view all the answers

Based on the information in the text, which of the following actions could a lender take to gather more information about a problem loan?

Require a copy of the general ledger each month and have statements and canceled checks routed through the lender's office Signup and view all the answers

Which of the following is a key question to consider when developing strategies for a problem loan?

Will the company lose more money by continuing to operate or by shutting down? Signup and view all the answers

Which of the following actions could a lender take to gather more information about a problem loan?

All of the above Signup and view all the answers

What is the most important tool in detecting a problem loan, according to the text?

The text does not mention the most important tool in detecting a problem loan. Signup and view all the answers

If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest according to the text?

The text does not provide any information about what this situation suggests Signup and view all the answers

Which of the following is a key question to consider when developing strategies for a problem loan?

All of the above Signup and view all the answers

What is the primary purpose of reviewing the authority documents when dealing with a problem loan?

To determine who has the legal authority to borrow on behalf of the company Signup and view all the answers

Which of the following is the MOST important step a lender should take when faced with a potential problem loan?

Perform a comprehensive documentation review Signup and view all the answers

When developing strategies for a problem loan, which of the following should be a key consideration?

The ability of the account manager to effectively handle the workout Signup and view all the answers

Which of the following is the MOST important analytical aid for a lender when evaluating a problem loan?

Comprehensive cash flow analysis and liquidity assessment Signup and view all the answers

When faced with a borrower who hands over the keys to the plant and states they are unable to continue operations, what should the lender's primary concern be?

The potential for the borrower to file for bankruptcy protection Signup and view all the answers

What is one of the highest potential costs associated with problem loans?

All of the above Signup and view all the answers

Which of the following is NOT mentioned as a potential cost or consideration when developing strategies for problem loans?

Opportunity cost of lost investments Signup and view all the answers

When dealing with a problem loan, what is the recommended approach regarding legal counsel?

Request an initial fee estimate and updated estimates Signup and view all the answers

Based on the information provided, which of the following is a potential warning sign that a loan may become problematic?

Frequent overdrafts on the borrower's accounts Signup and view all the answers

When developing strategies for a problem loan, the text suggests that you have two main choices. Which of the following is NOT one of those choices?

Restructure the loan terms with the borrower Signup and view all the answers

In determining lien priorities for a problem loan, what is a crucial step to take?

Order lien searches and obtain copies of all filings from relevant locations Signup and view all the answers

If a borrower has delinquent tax obligations, what potential risk should be considered in developing a workout plan?

The tax liens may have priority over the lender's perfected liens Signup and view all the answers

If pending lawsuits or judgments against the borrower exist, what should the lender do?

Factor the risks into the workout plan based on legal counsel's assessment Signup and view all the answers

Which of the following actions is NOT recommended when gathering information about a problem loan?

Relying solely on the borrower's financial statements and disclosures Signup and view all the answers

If a borrower hands over the keys to the plant and claims inability to continue operations, what should the lender's immediate response be?

Consult legal counsel to assess the risks and potential next steps Signup and view all the answers

What potential liability may a financial institution face related to the exchange of credit information?

Being held liable for false representations or omissions in credit information Signup and view all the answers

When responding to a credit information request, what must an individual ensure to avoid liability for the financial institution?

Exercising reasonable care and diligence in providing accurate information Signup and view all the answers

What is a key requirement for a plaintiff to prove in order to establish liability in the exchange of credit information?

Misrepresentation or omission of significant facts Signup and view all the answers

What should financial institutions do before demanding payment on a loan without notice, according to the text?

Consult with legal counsel Signup and view all the answers

In what scenario can a financial institution take possession of collateral without prior notice, as mentioned in the text?

If the borrower is unable to continue operations and hands over the keys to the plant Signup and view all the answers

What are lender liability claims that financial institutions may face when suing to collect a debt?

Failure to negotiate in good faith Signup and view all the answers

Which of the following is NOT among the theories put forth in lender liability claims?

Improper loan processing Signup and view all the answers

What is one of the factors that lenders might require before issuing a commitment letter to a customer?

Proof of corporate existence Signup and view all the answers

When a borrower hands over the keys to the plant and says they are unable to continue operations, what does this action suggest according to the text?

A potential warning sign for lender liability claims Signup and view all the answers

What type of claim does the automatic stay NOT stop against a guarantor for a debt that arose before filing?

Legal action to enforce a collateral agreement Signup and view all the answers

What is the LEAST desirable approach for handling a problem loan according to the text?

Filing for bankruptcy and litigation Signup and view all the answers

Which of the following is a key consideration when developing strategies for a problem loan, according to the text?

All of the above Signup and view all the answers

What is the MOST important analytical aid for a lender when evaluating a problem loan, according to the text?

The text does not mention a specific analytical aid Signup and view all the answers

What is the primary reason for identifying potential problem loans early?

The text does not mention a primary reason for identifying potential problem loans early Signup and view all the answers

Which of the following is a potential warning sign of a deteriorating relationship between a lender and a borrower, according to the text?

All of the above Signup and view all the answers

What could happen if a lender serves on the borrower's board, based on the text?

Lead to interference/control risk and possible liability Signup and view all the answers

What is a possible consequence of a lender suggesting which of the firm's checks should be honored or returned?

Causing interference/control risk and potential damages Signup and view all the answers

Why is it important for a lender to avoid exerting pressure on the borrower's board according to the text?

To minimize interference/control risk and potential liability Signup and view all the answers

How can a lender reduce the likelihood of being held liable for damages to the borrower or third parties according to the text?

By avoiding interference/control risk Signup and view all the answers

What impact can disputes over conversations between parties have on a lender according to the text?

Result in lender liability suits Signup and view all the answers

Loan Problem Identification Process

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Questions and Answers

What is the least desirable approach for handling a problem loan according to the text?

Which aspect should be reviewed to gain insight into the ability of the account manager to handle a workout?

What is important when using legal counsel for dealing with problem loans?

What does a senior level task force provide in handling problem loans?

In gathering information about problem loans, what can correspondence reveal?

What is the most important tool in detecting a problem loan?

What may late statements from a company indicate?

What should you do if a company provides late statements or information?

Why are frequent overdrafts considered a warning sign of company problems?

How should an analyst respond when faced with late statements from a borrower?

Which of the following is NOT a potential warning sign that a loan may become problematic?

If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest?

Which of the following is NOT a recommended step when identifying and developing strategies for problem loans?

When dealing with a problem loan, what should the lender do first?

What is the primary reason for identifying potential problem loans early?

Which of the following is NOT a nonfinancial cause of company problems mentioned in the text?

Which of the following actions could be taken when a warning sign appears regarding a borrower's ability to pay taxes?

Which of the following is NOT mentioned in the text as a potential warning sign of deteriorating relationships between a company and its suppliers?

Which of the following questions should be considered when developing strategies for a problem loan?

Based on the information in the text, which of the following actions could a lender take to gather more information about a problem loan?

Which of the following is a key question to consider when developing strategies for a problem loan?

Which of the following actions could a lender take to gather more information about a problem loan?

What is the most important tool in detecting a problem loan, according to the text?

If a borrower hands over the keys to the plant and says they are unable to continue operations, what does this suggest according to the text?

Which of the following is a key question to consider when developing strategies for a problem loan?

What is the primary purpose of reviewing the authority documents when dealing with a problem loan?

Which of the following is the MOST important step a lender should take when faced with a potential problem loan?

When developing strategies for a problem loan, which of the following should be a key consideration?

Which of the following is the MOST important analytical aid for a lender when evaluating a problem loan?

When faced with a borrower who hands over the keys to the plant and states they are unable to continue operations, what should the lender's primary concern be?

What is one of the highest potential costs associated with problem loans?

Which of the following is NOT mentioned as a potential cost or consideration when developing strategies for problem loans?

When dealing with a problem loan, what is the recommended approach regarding legal counsel?

Based on the information provided, which of the following is a potential warning sign that a loan may become problematic?

When developing strategies for a problem loan, the text suggests that you have two main choices. Which of the following is NOT one of those choices?

In determining lien priorities for a problem loan, what is a crucial step to take?

If a borrower has delinquent tax obligations, what potential risk should be considered in developing a workout plan?

If pending lawsuits or judgments against the borrower exist, what should the lender do?

Which of the following actions is NOT recommended when gathering information about a problem loan?

If a borrower hands over the keys to the plant and claims inability to continue operations, what should the lender's immediate response be?

What potential liability may a financial institution face related to the exchange of credit information?

When responding to a credit information request, what must an individual ensure to avoid liability for the financial institution?

What is a key requirement for a plaintiff to prove in order to establish liability in the exchange of credit information?

What should financial institutions do before demanding payment on a loan without notice, according to the text?

In what scenario can a financial institution take possession of collateral without prior notice, as mentioned in the text?

What are lender liability claims that financial institutions may face when suing to collect a debt?

Which of the following is NOT among the theories put forth in lender liability claims?

What is one of the factors that lenders might require before issuing a commitment letter to a customer?

When a borrower hands over the keys to the plant and says they are unable to continue operations, what does this action suggest according to the text?

What type of claim does the automatic stay NOT stop against a guarantor for a debt that arose before filing?

What is the LEAST desirable approach for handling a problem loan according to the text?

Which of the following is a key consideration when developing strategies for a problem loan, according to the text?

What is the MOST important analytical aid for a lender when evaluating a problem loan, according to the text?

What is the primary reason for identifying potential problem loans early?

Which of the following is a potential warning sign of a deteriorating relationship between a lender and a borrower, according to the text?

What could happen if a lender serves on the borrower's board, based on the text?

What is a possible consequence of a lender suggesting which of the firm's checks should be honored or returned?

Why is it important for a lender to avoid exerting pressure on the borrower's board according to the text?

How can a lender reduce the likelihood of being held liable for damages to the borrower or third parties according to the text?

What impact can disputes over conversations between parties have on a lender according to the text?

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