Manage the Excess Amount/ Excess Adjustment

Overview

You can either move the excess amount to satisfy the dues by reducing the Principal Remaining or refund the excess amount to the borrower. However, you cannot move or refund more than the amount specified in the Excess field.

To do this, select one of the following while adjusting the excess amount:

• Refund after the loan closes

• Reduce the Principal Remaining

UI enhancement

This section lists the user interface enhancements made in various releases.

Spring'22

Manage Excess Amount button

On the CL Contract Detail page of the Details tab, the Refund button has been renamed to Excess Adjustment.

Excess Adjustment page

On the Excess Adjustment page, in the Refund Actions section, the following two new checkboxes have been added:

• Refund to Borrower

• Reduce Principal Remaining

Refund the excess amount to the borrower

Before the Spring '22 Release

Earlier, if you pay an excess amount, or, if the repayment amount is more than the outstanding Loan Balance at any time in the duration of the loan, then, to refund this excess amount, on clicking Refund at a time when the loan is closed, the system was throwing the following exception: 

“You can refund only against a loan with status - Closed.”

In other words, you were not able to refund until the loan was closed.

Reason for allowing refund before the loan closes

However, there are times when a borrower may pay an excess amount any time while the loan is active. In such scenarios, the business may need to refund the excess amount to the borrower whenever there is an additional (more than the loan balance outstanding) repayment on the loan account. Earlier, the system would not allow you to refund this amount when the loan is not closed. It would only allow refunding once the loan has been closed and the loan contract status was set to Closed - Obligations Met.

Expectation

The system must be able to refund the excess amount without closing the loan account; a loan must close after the loan balance is fully paid off and the mortgage is discharged, and the loan closure must be the last step of the whole process.

Spring '22 release onward

With the Spring '22 release, this expectation is met as the system is now enhanced to perform a partial refund on the loan too. Now if an excess payment is made and if you try to refund a loan that is not closed, the system successfully processes such a refund for the borrower.

Reduce the Principal Remaining

While adjusting the excess amount, if the user selects Reduce Principal Remaining, an LPT of the payment type Refund is created of the required amount with the Payment Mode as Excess and the refunded transaction amount is moved toward principal reducing the Principal Remaining satisfying the future dues, and considering the payment spread of the loan account. 

Thus, Q2 Loan Servicing has the ability to move the funds that are in excess to either the loan account or refund them back to the customer (borrower). 

Manage the excess amount

Prerequisites

The Excess field must have some amount to be managed.

Steps

1. Log in to your Salesforce account.

2. Click CL Contracts.

3. Go to the required CL Contract ID. 

4. Click Excess Adjustment on the Details page. 

5. Provide the details as described in the following table, and then click Save:

   Note:

   You can refer to the Excess Adjustment image as an example.

   Field	Action and Information
   Enter Excess Adjustment Amount section
   Transaction Amount	Specify the amount from the Excess that needs to be refunded to the borrower or to be reduced from the Principal Remaining.
   Excess	This field displays the amount in the Excess field. You cannot edit this amount.
   Excess Adjustment Actions section
   Refund to Borrower	Select this checkbox to refund the amount specified in the preceding Transaction Amount field to the borrower. This checkbox is selected by default.
   Reduce Principal Remaining	Select this checkbox to reduce the Principal Remaining by the amount specified in the preceding Transaction Amount field.

   

Refund after the loan closes

Prerequisites

• The loan has been paid off successfully.

• The status of the loan account is Closed- Obligations met.

Steps

To refund after the loan closes, follow the preceding steps with the Transaction Amount greater than the Payoff amount.

This will enable you to see the only one option when you click Manage Excess Amount and that option is Refund to Borrower.

For example, if, for the loan amount of $6,00,000, a borrower has paid $6,02,000, then $2,000 is the excess amount that must be refunded. The Excess field in the Account Balance Details section of the loan contract displays the excess amount. When you select Refund To Borrower and then click Save, the Excess amount gets refunded to the borrower and the loan application gets updated with the Total Amount Paid as $6,00,000 and the Excess amount as 0.00.

On refunding to the borrower

On refunding the excess to the borrower:

• The amount from the Excess field goes to the borrower.

• The value in the Excess field becomes zero. 

• OLT of the type Refund is created.

On reducing the Principal Remaining

On selecting Reduce Principal Remaining:

• LPT is created of the payment type Refund and Payment Mode Excess. This LPT can be reversed.

• The excess amount is reduced by the amount given in the Transaction Amount field of the Excess Adjustment page.

• Whenever there is an investor attached to the contract, then, after running the Investor Payout job, the following fields get updated:

  • Investment Remaining amount

  • IO balance

• The excess amount reduced from the Principal Remaining satisfies only the principal amount of the LPT.

Reverse the refunding to the borrower

Q2 Loan Servicing allows you to reverse the refund to the borrower.

To reverse the excess amount movement to the borrower, you need to first reverse the Refund OLT. The system then creates another OLT with the type of Refund Reversal, and then reverses the Refund OLT.

Prerequisites

• A refund is made to the borrower (An OLT of type Refund is created in the system.)

Steps

1. Log in to your Salesforce account.

2. Click CL Contracts.

3. Go to the required CL Contract ID. 

4. Click Transactions.

5. Click Other Transactions.

6. On the top right corner of the page, from the dropdown list, click Refund Reversal.

   

On reversing the refund

On clicking Reverse:

1. OLT of type Refund Reversal is created.

2. Refund OLT is reversed.

   

New Global Method

The following global method is added to the AbstractLoanActions class:

Loan_Account__c refundALoan (Id loanId, Date transactionDate, Decimal transactionAmount, boolean refundToCustomer, boolean satisfyDues)

With the Spring'22 release, in Q2 Loan Servicing, the exisitng refundLoan API calls the new refundALoan(Id, txnDate, 1000, true, false). The parameters are passed such that this existing API performs the same actions as it used to before the Spring'22 release.

Objects Modified

The Loan Payment Transaction object is modified to include the following picklist field:

• Transaction Type: A new picklist value named Refund is automatically added to this field by an auto-upgrade script while upgrading to Spring'22.

Out of scope for this release

Backdated adjustment of the excess amount is not in scope for this release.