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How to generate the negative amortization cap exceeded report?

This article discusses how to generate the Negative Amortization Cap Exceeded Report for ARM loans.

Adjustable rate mortgages that include a payment cap have the possibility of negative amortization. Negative amortization means that the loan balance increased because the periodic payment is not large enough to pay all the interest due on the loan.

Because payment caps limit only the amount of payment increases and not interest rate increases, payments sometimes do not cover all the interest due on the loan. This usually means that the amount of interest shortage is automatically added to the loan balance, and interest may also be charged on that amount. The borrower may end up owing more later in the loan term than he did at the start.

To avoid the possibility of the loan increasing past the equity available in the property, many adjustable rate mortgages include a cap on negative amortization. The cap typically limits the total amount to which the loan balance can increase to a percentage such as 125% or 110%.

A negative amortization cap indicates that once this point is reached, monthly payments will be recalculated (recast) to fully repay the loan over the remaining term. During a recast, payment caps do not apply.

NOTE: All ARM loans with current loan balances that have exceeded their negative amortization limits are included in the report. Loans with zero original balances or without negative amortization caps are excluded from the report.

To generate the Negative Amortization Cap Exceeded Report:

  • Click on running Loan Servicing in the left panel of The Mortgage Office®.
  • Click on Tasks & Reports.
  • Click print Negative Amortization Cap Exceeded Report located underneath the Adjustable Rate Mortgages section.
  • 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.

    • 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 Print button Print to preview the report for printing or saving, click or CANCEL Cancel to abort the generation of the report.

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