Banks determine fair value (the value they can reasonably place on loans) using a variety of factors. Those factors include but are not limited to the following:
- Similar transactions for cash
- Secondary market values of similar financial instruments
- The credit standing of the debtor or guarantor
- Prevailing interest rates
- Available pricing options
- Anticipated delays in receipt of payment
- Tax consequences
References
Accounting for Loan Swaps (BC 200, May 1985)
Provides guidance in accounting for loan swaps, principally of foreign borrowers
See Also
The Mortgage Note Selling Process: What to Expect Step by StepMortgage Note Market Value - What’s Your Mortgage Note Worth?Time Value of Notes (Grade 1)What Interest Rate Can I Charge in a Promissory Note? - Vann Attorneys, PLLCSee also Accounting
