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How to use the advanced by and on behalf of fields?

This article discusses how different complex scenarios can be solved by using the Advanced By and On Behalf of Fields.

There are many situations where funds must be advanced in order to protect the equity of a loan. One common situation is when lenders must advance payments to avoid being "wiped-out" by a senior lien threatening to foreclose. The following examples illustrate to handle this situation using the Advanced By and On Behalf Of fields.

Using the advanced by and on behalf of fields:

Sample 1:

  • Lender Mike Collier (Account: MI10) owns 100% of the loan and advances $500 for fire insurance on his own behalf.
    • Advanced By: Enter the MI10 account and $500 for the amount.
    • On Behalf of: Leave blank.
  • The charge will be shown as $500 owed by the borrower and due to the advancing lender. When the borrower repays the charge, the funds will be automatically forwarded to the lender.
Sample 2:
  • The servicer (Account: BROKER) advances $500 for fire insurance on behalf of lender Mike Collier (Account: MI10).
    • Advanced By: Enter the BROKER account and $500 for the amount.
    • On Behalf of: Enter the MI10 account and $0 for the amount.
  • In this scenario, the charge of $500 is primarily owed by the borrower but it will also be shown as $500 owed by the lender to the servicer for having advanced the funds on his behalf.
  • If, before the borrower pays the charges, the lender reimburses the servicer either fully or partially for the $500 advance, the amount paid will be 'moved' from the Advanced By field to the On Behalf of field.
  • Once the borrower pays the charge, the funds will be forwarded to the lender/vendors according to their outstanding amounts.
Sample 3:
  • The servicer (Account: BROKER) advances $300 for fire insurance on behalf of lender Mike Collier (Account: MI10) and Mike Collier also advances $200 for a total charge of $500.
    • Advanced By: Enter the BROKER account and $300 for the amount.
    • On Behalf of: Enter the MI10 account and $200 for the amount.
  • In this scenario, the $500 charge owed by the borrower will be shown as $300 owed by the lender to the servicer for advancing the funds on his behalf, and $200 owed to the lender for amount he advanced on his own behalf.
 
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