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How to calculate rate & payment adjustments?

This article discusses how to Calculate Rate & Payment Adjustments for ARM loans.

The Calculate Rate & Payment Adjustments assistant will guide you through the process of calculating and applying rate and payment changes. 

To accurately calculate new rates, the assistant will start calculating the base rate by adding the appropriate index rate plus the loan's margin. It will then apply periodic rate increase and decrease caps as well as life caps, such as ceiling and floor, to arrive at the new rate. If carryover is selected in the loan file, the assistant will also try to use any carryover balance from prior adjustments or add any capped interest rate to the loan's carryover balance.

Also, the assistant will calculate a new principal and interest payment amount (P&I) for all payment adjustments, taking into consideration payment caps, negative amortization caps, recast due and stop dates.

To calculate ARM rate & payment adjustments:

  • Click on running Loan Servicing in the left panel of The Mortgage Office®.
  • Click on Tasks & Reports. 
  • Click on the nicer looking printer icon Calculate Rate & Payment Adjustments hyperlink, located underneath the Adjustable Rate Mortgages section of the page.
  • Select All Loans or Selected Loans by Account from the drop-down list.

TIP: When you choose Select Loans by Account you must enter starting and ending account numbers in the From and To input fields. You can enter the same starting and ending account number to select a single loan, or you can enter a logical range to select multiple loans. For example, if you enter HBT as the starting and ending accounts, all loans with account numbers starting with HBT will be included.

  • The next drop-down allows you to choose All Indexes or select an individual index.

NOTE: If you select a single index, then only the adjustable rate loans tied to this index will be included in the report.

  • Check square-check-solid Exclude Borrowers on Hold to exclude all borrowers that have been placed on hold; otherwise, uncheck this box.
  • If necessary, use the Select Categories to Include or Exclude dialog to include or exclude loans based on their categories.

NOTE: Categories are keywords or phrases that help you create logical loan groups. To learn more read How to Use the Categories Window.

  • Click NEXT blue button without border Next.

TIP: You may, as many times as needed, use the NEXT blue button without border Next and BACK button Back navigation buttons to retrace your steps and make changes.

  • The Select Loans for Adjustment page presents a list of loans based on the criteria and options you entered in the prior step.
    • In addition to your selection criteria, the system also applies its own selection methodology. To learn more about this subject, please read this article. 
  • At this point, you may accept the list as-is, or individually check or uncheck loans to be adjusted. To select a record for rate and/or payment adjustment, check the square-check-solid box located to the left of the ACCOUNT column. 

NOTES:

  • You won't be able to proceed to the next and final step unless one or more loans are selected.
  • You may use the Select All and Clear All hyperlinks near the bottom of the window to mass check or uncheck all loans on the list.
  • You may also select the Export to Excel hyperlink to automatically generate and download a report to your computer's Downloads folder.
  • Click NEXT blue button without border Next.
  • To start the process of calculating the adjustments, click Finish Finish.
    • You can also click CANCEL Cancel to abort the operation. 
  • Upon completion, the assistant will provide you with a detailed message informing you whether all calculations were performed without error or, in the case it encountered errors, it will notify you.
    • If errors were encountered, click OKOK to display the Calculate Rate & Payment Adjustments Errors & Exceptions Report. This report lists all loans for which the system was unable to calculate the rate and/or payment change with a detailed description of the errors encountered. You may print or preview this report and make necessary corrections. Once the corrections are made, you can run this assistant again and finish the job. This report may also be emailed.
    • Once you're finished with the report, click CLOSE black button with no border Close to close the window. 
  • If no errors were encountered, the system will provide a message that says: "Congratulations! All selected rate and payment adjustments were successfully added to the modifications table."
  • Click OKOK to close the assistant. 

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