How to add or edit penalties in the terms of a loan?

CAUTIONS:

These options are generally selected using the New Loan assistant and changing them once transactions have been processed could yield undesirable results.
Any changes made will affect how future calculations are made and should only be attempted by a knowledgeable operator or supervisor.

To add or edit penalties in the terms of a 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.
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 Penalties Tab.
Add or Edit information in the following sections:

Late Charge:

Field:

Description:

Late Charge Method

This option is used to determine if a payment should be assessed a late fee and how that fee is assessed.

CAUTIONS:

Please refer to your loan documentation to make sure the proper methodology is selected.
Please note that references to Reg AA and California CC 2954.4 are used purely to determine if a payment should be assessed a late fee based on the Number of Grace Days. The amount of the late fee is determined by the values entered in the Minimum Late Charge, Percent of P & I and Additional Daily Amount fields described below.

Method:	Description:
Default	Under this methodology, a late charge is assessed for a payment if the payment is received after the grace period. The grace period is defined by the Number of Grace Days as described below. A skipped payment as well as all subsequent payments are assessed late fees until the borrower makes the skipped payment and thus becomes current. This methodology is the same as the Reg AA methodology below.
Reg AA	This methodology follows the late charge guidelines as explained in the Federal Reserve Board's Credit Practices Rule which is contained in subpart B of Regulation AA. This methodology functions the same as the Default methodology described above. Sample scenario: Assume a borrower is currently due for February 1st. Also, assume the loan terms call for a 10-day grace period. On March 5th, the borrower sends you the February 1st payment. A late charge is obviously assessed for the February 1st payment since the payment was received after the grace period. The loan is now due for March. On March 12th, the borrower sends you the March 1st payment. Under this methodology, a late charge is also assessed because the March payment was received after the grace period. A late charge will be assessed on all subsequent payments received after the grace period.
CC 2954.4	This methodology follows the guidelines as defined in California Civil Code Section 2954.4. In this case, a payment is assessed a late charge if both of the following conditions are true: The payment is received after the grace period. The grace period is defined by the Number of Grace Days as described below. No regular payment for a prior due date was received within the grace period of the payment in question. Sample scenario: Assume a borrower is currently due for February 1st. Also, assume the loan terms call for a 10-day grace period. On March 5th, the borrower sends you the February 1st payment. A late charge is obviously assessed for the February 1st payment since it is past its grace period. The loan is now due for March. On March 12th, the borrower sends you the March 1st payment. Although the payment was received after the 10-day grace period, a late charge is not assessed because a regular payment was received on March 5th, which is within the March payment grace period.

Number of Grace Days

Enter the number of days after the due date before a late charge is assessed.

TIP: A late charge is due on the day after the grace period expires. For example, assuming a payment due date of the 1st, and a 10-day grace period, a late charge would be assessed on the 12th.

Grace Days Method

The grace days method is used to determine how the grace days are calculated.

Method:	Description:
Business Days	When determining if a late charge is to be assessed, the system takes into account weekends and holidays. For example, a payment due on Friday with a 1-day grace period would be late Sunday, but since Saturday and Sunday are not business days, the payment is late if received on Tuesday or later. Holiday calculations only apply to USA locale.
Calendar Days	When determining if a late charge is to be assessed, the system takes into account actual calendar days, regardless of weekends and holidays.

Minimum Late Charge

Enter the minimum amount for the late charge, if applicable.

Percentage of

Choose which portion to charge the late from.

Method:

Description:

P & I

Choose this option if the late charge is a percentage of the P & I portion of the regular payment, then enter the percentage in the field to the right.

For example: enter '6' to assess a 6% late charge.

Total Pmt

Choose this option if the late charge is a percentage of the total amount of the regular payment, then enter the percentage in the field to the right.

For example: enter '6' to assess a 6% late charge.

Additional Daily Amount

Enter an additional amount to be charged for each day after the grace period.

Distribute to Lenders

The percentage of late charges collected to be distributed to lenders according to their ownership.

For example: if half of the late charges collected must be distributed to the funding lenders, then enter 50%.

Distribute to Orig. Vendor

The percentage of late charges collected to be distributed to the Originating Vendor.

TIP: This field is only enabled if an Originating Vendor was selected in the Details tab of the Terms section.

Distribute to Company

Any portion of the late charge that remains undistributed between the lenders and the originating vendor is automatically distributed to the company. This is a read-only field.

Default Interest

Field:	Description:
Default Interest	Select this option if this loan has a default interest clause. NOTES: Default interest, also called penalty interest, is a punitive interest charged to a borrower if installments are not paid according to the loan terms. Default interest is only available in tangent with the GTM (Graduated Terms Mortgage) module.
Default After	Enter the number of days (or months) a payment must be past due to be considered in default, then make sure the correct method is selected in the drop-down menu to the right.
Default Effective Until	Select Current or Maturity from the drop-down menu: Current: The loan will be considered in default until it is brought current. Maturity: The loan will be considered in default until it reaches maturity.
Default Rate Method	Select Fixed Rate or Modifier from the drop-down menu: Fixed Rate: It will replace the Note Rate while the loan is in default. Modifier: The effective rate will be loan's Note Rate plus the Modifier value. (Commonly used with ARM loans)
Default Rate Value	Enter the Fixed Rate or Modifier value. A fixed rate example: enter 12.00 for a 12.00% fixed rate. A modifier example with a 10% note rate: enter 12 for a modified rate of 22% (10+12).
Distribute to Lenders	The percentage of default interest to be distributed to lenders according to their ownership. For example: if half of the default interest must be distributed to the funding lenders, then enter 50%.
Distribute to Orig. Vendor	The percentage of default interest to be distributed to the Originating Vendor. TIP: This field is only enabled if an Originating Vendor was selected in the Details tab of the Terms section.
Distribute to Company	Any portion of the default interest that remains undistributed between the lenders and the originating vendor is automatically distributed to the company. v This is a read-only field.
Default Rate History	Click this hyperlink to open a window showing all past and current default rate changes for this loan.

Prepayment Penalty:

Field:	Description:
No Prepayment Penalty	Select this option if there is no prepayment penalty provision for this loan. All other fields are disabled if this option is selected.
Standard Prepayment Penalty	Select this option to enable the standard prepayment penalty and enter the additional information in the fields: The percentage of the balance not to be exceeded. Notate whether the percentage is of the Unpaid or Original Balance of the loan. The number of months interest the borrower will be charged. Select which balance to use for calculating the months of interest: Unpaid or Original Balance.
Other	Select this option to enable the drop-down list and select a custom prepayment penalty calculation.
Early Closing Fee	Select this option and notate a flat fee to charge as a penalty for closing the account within the number of months specificized.

Prepayment Penalty Expiration & Distribution:

Field	Description
Prepayment Penalty Expires	Enter the date in which the prepayment penalty expires. A prepayment penalty will not be assessed on or after this date. TIP: Leave this field empty if the prepayment penalty never expires.
Distribute to Lenders	The percentage of prepayment penalty collected to be distributed to lenders according to their ownership. For example: if half of the prepayment penalty collected must be distributed to the funding lenders, then enter 50%.
Distribute to Orig. Vendor	The percentage of prepayment penalty collected to be distributed to the Originating Vendor. TIP: This field is only enabled if an Originating Vendor was selected in the Details tab of the Terms section.
Distribute to Company	Any portion of the prepayment penalty that remains undistributed between the lenders and the originating vendor is automatically distributed to the company. This is a read-only field.

Click to save or to abort changes.