Subordinated Debt as Net Worth

ID Status Date Public/Private Industry AHACPA Contact
#7793 Closed public FHA Lender
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Does HUD consider long-term subordinated debt(which is not callable) as equity for the net worth calculation , just the way a senior lender considers subordinated debt as equity?

Kathy Christensen

From Mike Olsen:

There is no discussion that I can find or have seen concerting subordinated debt in any of the handbooks as to whether it is considered equity for the net worth calculation. In addition, I do not recall ever seeing subordinated debt as equity included on any financial statements. I would think it would be very difficult to have it classified as equity. In most cases it should be reported as a liability. I am sure if the FHA reviewers saw this classified as equity, they would certainly question it and most likely not allow it.

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