Please note that this article is not intended to constitute legal advice; instead, the considerations and procedures are for general informational purposes only. Applied Business Software makes every reasonable effort to present complete, accurate information, but assumes no liability for errors or omissions.
To notate a bankrupt loan in The Mortgage Office®:
-
Click on the
Loan Servicing drop-down menu in the left panel of The Mortgage Office®. -
Click the Loans drop-down menu.
-
Click All Loans from the list that drops down.
- From the All Loans grid, select the loan you want to modify.
TIP: If the record you want to edit is not visible, use the grid's vertical scroll bar to scroll the contents of the grid up or down, or click 
Find to search for the record by entering your own search criteria. For additional information see How to Use Find and How to Use the Data Grids.
- Click
from the options available on the top panel or double-click on the item. - Click
Terms from the list located on the left of the window, and select the Details Tab. - Click the Categories hyperlink to open the Categories dialog window.
- In the Available categories list,
check the box next to the Bankruptcy. - Click
OK to save the changes or 
Cancel to abort.
TIP: At this point, we suggest creating a duplicate loan to track the payments made by the trustee vs. the payments that were made by the borrower. We also suggest naming both files similarly so they can be identified quickly.
To create a duplicate loan:
-
Click on the
Loan Servicing drop-down menu in the left panel of The Mortgage Office®. -
Click the Loans drop-down menu.
-
Click All Loans from the list that drops down.
- Click
New. - In the New Loan Assistant, select
Loan as the source. - Click the
Lookup tool. - Select the bankrupt Account from the list and click
OK. - Click
Next.
- Check the boxes next to the information you want to duplicate.
- Click Next.
- Change or edit the name as needed and click
Finish.
TIP: We suggest naming both files similarly so they can be identified quickly.
- In the duplicate loan that was just created, re-enter all the lenders’ current principal balances according to the original loan, by funding the loan.
NOTES:
- The percentage of ownership of the duplicate loan should match the original loan.
- The Interest Paid to Date for the duplicate loan is the final payment date/Maturity date of the original loan.
- Enter any delinquent payments and other loan charges
- Reduce the principal balance of the duplicate loan to $0.00 by doing a negative funding of the same amount.
- For example: if the principal balance is $100,000.00, fund the loan with a -$100,000.00 amount.
- Adjust and advance the original loan's dates and balances, according to what date the bankruptcy court requires:
- Adjust the principal balance to the appropriate reduced balance, according to your requirements, by performing a negative funding of the same amount.
- For example: if the principal balance is $100,000.00, fund the loan with a -$100,000.00 amount.
- The Interest Paid To and Next Payment dates also need to be advanced, according to your requirements.
- Adjust the principal balance to the appropriate reduced balance, according to your requirements, by performing a negative funding of the same amount.
Considerations of multiple loans:
- There are issues that arise by trying to keep all of the history in the same loan vs. creating a duplicate loan that should be considered:
- The Interest Paid To date and Next Payment date will constantly have to be adjusted to reflect who is paying what (trustee or the borrower).
- This would not be feasible at all with an amortizing loan, as the system will not manage two separate reducing principal balances in one loan.
- Even with an interest-only loan, should the borrower decide to pay principal for the current payments, the principal balance would then be inaccurate for the past due payments being made by the trustee.
- Depending on the bankruptcy plan structure and how the terms are set, you may need to adjust the options in the Late Charge section on the Penalties tab, in the Loan Terms.
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