Question

Facts
·       Mortgage Principal at origination 1/1/2020: $10,000,000
·       Annual Interest Rate at origination: 6%
·       Term of Mortgage from origination 1/1/2020: 20 years
·       Purchase Price: $10,000,000 on 1/1/2020
·       The mall owner has stopped paying principal beginning April, 2021, and anticipates being unable to pay even the interest portion beginning September, 2021 unless the CDC allows less strict mask and social distancing requirements.
·       The mall had a fair market value of $20 million on 1/1/2020, and expects a current appraisal to be at about $16 million.
·       Ignore refinancing costs.
·       The securitizations do not qualify for sale accounting, and the creditor retains legal title to the mortgage as well as a 10% participation in the mortgage.
·       Today is August 31, 2021.
1.Create an amortization table that allows for an input each period of the amount that the borrower actually pays. Using the facts of the case, use the amortization table structure to find the principal amount owed as of September 1, 2021.

2.Create a separate restructured loan that is a reasonable alternative to the current unaffordable mortgage.

3.Create an amortization table for the restructured loan with the modifications and expected mortgage payments. If the creditor and borrower would have different accounting treatments for the loan, create an amortization table for the creditor and the borrower.

Answer 1

1]	AMORTISATION SCHEDULE
				6%
PARTICULARS	DATE	AMOUNT OUTSTANDING	EMI	INTEREST	PRINCIPAL REPAID	AMOUNT OUTSTANDING
Principal at origination	01-01-2020	1,00,00,000				1,00,00,000
	01-02-2020	1,00,00,000	71,643	50,000	21,643	99,78,357
	01-03-2020	99,78,357	71,643	49,892	21,751	99,56,606
	01-04-2020	99,56,606	71,643	49,783	21,860	99,34,746
	01-05-2020	99,34,746	71,643	49,674	21,969	99,12,776
	01-06-2020	99,12,776	71,643	49,564	22,079	98,90,697
	01-07-2020	98,90,697	71,643	49,453	22,190	98,68,507
	01-08-2020	98,68,507	71,643	49,343	22,301	98,46,207
	01-09-2020	98,46,207	71,643	49,231	22,412	98,23,795
	01-10-2020	98,23,795	71,643	49,119	22,524	98,01,271
	01-11-2020	98,01,271	71,643	49,006	22,637	97,78,634
	01-12-2020	97,78,634	71,643	48,893	22,750	97,55,884
	01-01-2021	97,55,884	71,643	48,779	22,864	97,33,020
	01-02-2021	97,33,020	71,643	48,665	22,978	97,10,042
	01-03-2021	97,10,042	71,643	48,550	23,093	96,86,949
	01-04-2021	96,86,949	48,435	48,435	-	96,86,949
	01-05-2021	96,86,949	48,435	48,435	-	96,86,949
	01-06-2021	96,86,949	48,435	48,435	-	96,86,949
	01-07-2021	96,86,949	48,435	48,435	-	96,86,949
	01-08-2021	96,86,949	48,435	48,435	-	96,86,949
	01-09-2021	96,86,949	-	-	-	96,86,949

2] RESTRUCTURING-

AS DUE TO SPECIAL SITUATION OF PANDEMIC THE MALL OWNER CANNOT REPAY THE DEBT . HE IS WILLING TO RESTRUCTURE THE LOAN AND HENCE TO BENEFIT FROM THE ABOVE THE CREDITOR SHOULD EXTEND A ADDITIONAL LOAN AT SAME RATE

NOW , HERE THE BENEFIT OF ADDITIONAL LOAN IS THAT ,WE ARE PROPOSING THE CREDITOR TO EXTEND A LOAN EQUAL TO 12 INSTALLMENTS TO BE PAID BY THE MALL OWNER WHICH IS SUBSTANTIALLY LOW W.R.T TO THE 60% INCREASE IN THE MALL'S MARKET VALUE

NOW WHEN THE ADDITIONAL LOAN IS DISBURSED A NEW AMORTISATION SCHEDULE WILL BE GENERATED IN WHICH THE MALL OWNER AS WELL AS THE CREDITOR BENEFITS HENCE A WIN WIN SITUATION

ADDITIONAL LOAN - 12*71643=8,59,717.20

NEW OUTSTANDING PRINCIPAL - 105466676

NEW EMI - 75560

NEW TENURE - 240 MONTHS

NEW [SAME] INTEREST RATE - 6%

AS THERE IS A LIMIT ON THE SIZE OF ANSWER I CANNOT INSERT THE WHOLE RESTRUCTURED AMORTISATION TABLE BUT I HAVE SHOWN GLIMPSE WHICH WILL HELP YOU TO UNDERSTAND THE SAME

2]	RESTRUCTURED LOAN
					6%
PARTICULARS	DATE	AMOUNT OUTSTANDING	EMI	INTEREST PAID	PRINCIPAL REPAID	AMOUNT OUTSTANDING
Principal at origination	01-09-2021	96,86,949	-		-	96,86,949
	01-09-2021	1,05,46,667	75,560	52,733	22,826	1,05,23,840
	01-10-2021	1,05,23,840	75,560	52,619	22,940	1,05,00,900
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