Loan Re-Finance

[Archimage]

A participant has gotten behind on loan payments and will go in default on 6-30. The participant cannot come up with all of the loan payments right now to keep the loan from going into default.

Is it okay to refinance the loan with the missed payments and the "ghost"

interest as long as the amortization period remains the same?

[E as in ERISA]

I think that's kind of a chicken and egg question.

The refinance rules require that the existing loan satisfy the old rules.

In your case tuey have a loan that does not satisfy the level amortization requirement at the current time -- certain installment have not been made. But it is in the cure period and is not yet subject to deeming. They can bring it into compliance by paying off the late installments by the end of the cure period.

So they might be able to argue that the re-finance pays off the old loan in full and thus causes the old loan to be in satisfaction of the rules at the time of re-finance.

But I question whether those two events can occur simultaneously. Whether you can use the refinancing itself to satisfy the pre-condition of the refinancing (the requirement that the old loan be in compliance).

[Archimage]

That was my line of thought as well but I am not comfortable with it.