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Unsecured loan commitments are commitments made by financial institutions that are a contractual obligation for future funding. They should not be confused with a Letter of credit that requires a specific trigger event before funding is required. More and more, original lending institutions that sell Senior loans and funded or unfunded commitments associated with institutional investors such as investment management firms, mutual funds and insurance companies.
Typically, unfunded commitments are separated into two categories:
- Multiple Advances, Closed Cover: This type of loan (usually a construction loan) increases the amount of additional to a certain extent, based on several criteria such as inspection and approval of withdrawal requests. Reduced principal received during the loan period not is available for withdrawal, but has paid the outstanding balance.
- Spin or Open End: This type of loan (known informally as Credit Line) allows the borrower to continue borrowing up to the original loan amount. Reductions are immediately available for future progress.
Banks are required to report an unfounded commitment to the RC-L schedule of the Quarterly Conditions and Earnings Report (Call Report).
Video Unfunded loan commitments
External links
- FDIC Call Report Information
Source of the article : Wikipedia
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