Variable Loan Planned Rate Changes

Variable Loan Planned Rate Changes

Purpose

To automate the process of changing interest rates and the resulting instalment amounts due or maturity dates on Variable Loan accounts with instalments.

The system will:
  1. Generate a list of accounts affected by a rate change
  2. Calculate a new maturity date or instalment amount for the account
  3. Create communications advising the change of rate and their new instalment or maturity date
  4. Post the updated instalment or maturity date to the account
  5. Post the new interest rate to the account

Timing

Future interest rate changes must be loaded prior to running this process with the date they are to be effective from.

Generation of the predicted instalment amounts and/or maturity date and creation of change advice communications would typically be undertaken two – three weeks before the effective date of the future interest rate change.

Posting of the new Instalment Amount or Maturity Date for each account will be completed on the first business day following the interest rate change date.

Prerequisites     

Control Record Default Action

  1. Variable Loan | Edit/View Control Details
The Interest Rate Change Default Action field must be setup prior to generation of the pending rate changes.

A default calculation option must be specified:
  1. Instalment
    A new Instalment amount will be calculated by determining how many instalments are currently left to pay on the account. The system will then calculate the new instalment amount needed to pay off the loan in the same number of instalments.
    The calculation of remaining instalments is undertaken by dividing the current instalment amount into the future ledger balance including interest that would charge at the current future ledger interest rate.
  2. Maturity Date
    Based on the existing instalment amount and frequency, the system will calculate the date which the loan will be paid off once the new interest rate is applied.
Note: One of the options must be selected. Exceptions can be dealt with through the Planned Rate Change Details dialog, once the Planned Rate Changes have been generated.

Future Dated Interest Profile Lines or Base Rate Lines

New interest rate change lines must be loaded to the relevant Interest Profiles or Interest Base Rates prior to the generation of the Planned Rate Changes. The Interest Profile / Base Rate must be selected to a Variable Loan account for that account to be included in the process.

Master Communication Setup

A Master Communication should be setup for the letter advising clients of the change to the interest rate, and their repayment terms. There are specific communication replacement fields created by the process that will be used.

Access

  1. Variable Loan | Create & Maintain Planned Interest Rate Changes

Process

Generate Planned Rate Changes

The Planned Rate Changes are displayed once the process wizard launched from the  function has been completed. The process wizard will display a list of accounts found. These should be quickly reviewed to ensure that all expected accounts are included before the process is completed. The process may be cancelled if the list does not generate the expected results.

Review Planned Rate Changes

Once the list is generated, the Planned Rate Changes may be reviewed more thoroughly in order to deal with any exceptions (eg. There may be a balloon payment expected at the end of the loan. 
The calculator will not be aware of this so the resultant instalment amount calculated would be much larger then intended.  The correct instalment amount can be calculated using the Vault
 incorporating the balloon payment as the final instalment.)
The Account Details dialog can be accessed by selecting the Planned Rate Change item and clicking 

The Planned Rate Change Details dialog can be accessed using .  Changes to instalment amount and maturity date may be made here.

Accounts may also be removed from the Planned Rate Change using .  Note that this should be used with caution, as the Interest Profile rate change will still be applied to that account, unless this is also changed.

Create Communications

Select all records that you wish to send Communications for. If different Communication Types are required for various accounts, the Planned Rate Change Browse search criteria should be used to restrict results.  Communications can then be created for each set of results.

Once the records are selected, the   process wizard should be accessed:


[F2] to select the Communication Type and 

Review the list of Communications and ensure that the expected number will be created  may be used if further review is needed

 to create the Communications

 | 

The Communications can then be dispatched from the Communications Browse

Update Planned Rate Changes

Clients may request changes to their maturity date or instalment amount.

This may be completed by ing the Planned Rate Change Details dialog and making adjustments to the details.

Post Rate Changes

A backup should always be taken immediately prior to the planned rate changes being posted.

On the first business day following the Interest Rate effective date, the changes should be posted to the accounts.

This process will:
  1. Update the Maturity Date and/or the Instalment Amount
  2. Post the Interest Profile or Interest Base Rate line, resulting in the interest rate change being applied to the account
Highlight to select all records that you wish to Post the Planned Rate Changes for. Browse search criteria can be used to filter records if required.
 

Review the ‘Welcome’ dialog and then click 

Configure the process by entering the effective date of the interest rate change.

Rate changes may be posted on an interest profile basis.  [F2] to select an interest profile or leave blank.

The accounts to be posted will be displayed. Review these to ensure they are as expected and click  to post. 

 may be used if further review is needed.

Once the progress bar is complete, Click  |  to return to the Planned Rate Change Browse.

Result

The status of the planned rate changes will have been updated to ‘Posted’.

The Account Maturity Date and/or Instalment Amount will be updated on the Account Details dialog.

The Interest Profile rate will now also show as ‘Posted’. A Rate Change transaction will have posted to the account with a value date that the interest rate change was applied on the interest profile.  Interest will be calculated at the new rate from this date forward.




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