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used to secure the borrowed amount (collateral), if any, and the terms of repayment. Loans may be made through commercial entities including financial institutions and informally between persons and entities. The treatment of loans depends on whether it is “bona fide” – that is, the terms of the loan agreement are made in good faith and are enforceable under applicable State law (the borrower can be sued if the loan is not paid back), the agreement is in effect at the time the lender transfers funds, the loan is secured, and the borrower agrees to the terms of repayment. Any loan that is not bona fide may be treated as a gift, unless it qualifies as a promissory note under § 3.6.5(A)(2)(f) of this Part below; in such instances, the full value of the loan may be counted as income and/or a resource depending on whether the applicant is the lender or borrower and the manner in which it is paid. In addition, such loans may be considered a disqualifying transfer for Medicaid LTSS purposes if their fair market value cannot be discerned in accordance with Part 50-00-6 of this Title. In general, unless explicitly excluded as a resource under § 3.7.4 of this Part, bona fide loans are treated as follows for the lender or borrower: (1) Borrower. The amount of the loan that the borrower must repay, along with any interest, is excluded as a countable resource in the month the loan is executed. Any portions of the loan remaining on the FOM after the month it is executed is a countable resource. (2) Lender. The amount the lender loans and the loan repayments may be treated as countable resources depending on the circumstances of its execution. If a loan is negotiable and can be sold or discounted on the open market it is considered a countable resource. Interest is always treated as unearned income; principal payments are the conversion of a resource and are not treated as income. e. Mortgages. A debt instrument, secured by the collateral of specific piece of real estate property, that a borrower is obliged to pay back without paying the entire purchase price upfront by making a pre- determined set of payments. A borrower is considered an owner of a mortgaged property for the purposes of determining Medicaid eligibility. The purchase of a mortgage may be treated as a disqualifying transfer for Medicaid LTSS purposes if made for less than fair market value in accordance with Part 50-00-6 of this Title. f. Promissory notes. A promissory note is a written, unconditional agreement, usually given in return for goods, money loaned, or services rendered, whereby one (1) party promises to pay a certain sum of money at a specified time (or on demand) to another party.