13
In evaluating whether to make a commercial loan, FNBP would
consider factors similar to those considered in evaluating
consumer loans. FNBP examined payment capacity, including debt-
to-income ratios, payment history, financial stability, and,
where appropriate, issues relating to collateral including loan-
to-value ratios. Financial stability for commercial borrowers
involves an examination of sales, earnings, and management.
Commercial loans were closed at various locations including
FNBP's offices, the prospective borrower's place of business, or
an attorney's office.10 Closing included, among other things,
the borrower's execution of a note or other evidence of
indebtedness, execution of a document conveying a security
interest in collateral, delivery of those documents to FNBP and,
on the part of FNBP, some act making the loan proceeds available
or, in the case of a new line of credit, some act memorializing
FNBP's agreement to disburse funds on demand. The closing of
some commercial loans was handled by FNBP employees, and others
were handled by outside legal counsel. If the closing were
handled by FNBP employees, closing documents would be prepared
and recorded by those employees. If the closing were handled by
outside counsel, the outside counsel would prepare and record
closing documents. The recording of security interests in
10When the loan application was denied, the employee dealing
with the prospective commercial borrower would discuss the
reasons for credit denial with the prospective borrower and
encourage the prospective borrower to apply again in the future.
In appropriate instances, the applicant would be offered a
smaller loan or a loan on different terms.
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