Frequently Asked Questions
Overview
This page lists the topic-wise frequently asked questions (FAQs) that you may have with respect to the Q2 loan servicing product. It also links to the pages of the guides where you can find more information on it.
Topics
DAG: Job Parallelization
What happens if you change the Number Of Instances?
If you change the value of the Number Of Instances from, say, 5 to 4, the records with thread number 5 will not be processed by the job. The number of instances must be in sync with the thread numbers you have on records. However, if the number of instances is 1, you need not worry about the thread number on contracts.
What happens if the Thread API Name is not given?
If the Thread API Name is not given, DAG will not use the optimized way to divide the records among threads, and you will encounter the system limit exceptions such as CPU Time Exceeded and Heap Limit Exceeded.
Holiday Treatment Setup
Can you provide both Pre-Bill Days and Pre-Bill Date?
There is no restriction, but if you provide both, then Pre-Bill Days is considered.
Loan Closure
When does a loan status change to Active - Marked for Closure?
The loan contract status changes to Active-Marked for Closure in the following conditions:
When the payoff payment amount is within the payoff tolerance limit.
When you have a deposit amount sufficient to close the loan.
When you have a rebate amount to be given back to the borrower on early closure.
When loan has excess amount which is > loan balance.
If a loan is FIT and revolving, then the loan will not go to marked for closure status when “funding stop basis” is draw period end date and you are within the draw period. It will be in Active-Good Standing even if it satisfies the above conditions.
Compounding Interest
What is the difference between Compounding Interest flag and the Is Capitalization enabled flag?
When you enable the Is Capitalization Enabled flag on the product, you are enabling the calculations for capitalization of unpaid interest for the servicing of the loan. However, these are not reflected in the schedules. To enable the compounding of interest for schedules, you need to enable the Compounding Interest flag on the product. Once this is enabled, you can select the Compounding Frequency at the contract level to match the Interest Posting Frequency of the contract. The amortization schedule generated for the contract then displays the compounded interest.
Compounding Frequency is the frequency at which the unpaid interest gets added to the loan balance. While creating the lending product, lenders can opt to generate payment schedules by enabling the Compounding Interest. All contracts created for this product then compound the interest as per the compounding frequency and use the compounding interest when generating the repayment schedule.
The compounding frequency is used when calculating the schedule if one of the following two conditions is satisfied:
- Payment frequency > capitalization frequency
- The difference between the disbursal date and the repayment start date is greater than the frequency of the loan.
For more information on Compounding Interest and Frequency, see the Create a Simple Loan Product and Create a Simple Loan Contract sections of this guide.
Rescheduling
How does various factors get affected when a loan with capitalization enabled is rescheduled?
To know how some of the factors that get affected when a loan is rescheduled with capitalization enabled in it, see the following table:
| Is Capitalization Enabled | Maintain Delinquency | Reschedule Balance | Status of IPT | Interest Posted | Principal Remaining after Rescheduling | Additional Information |
|---|---|---|---|---|---|---|
| TRUE | FALSE | Principal Remaining | Not discarded | No change | No change | |
| TRUE | FALSE | Loan Balance | Discarded | 0 | Increased by the Interest Posted amount | |
| TRUE | TRUE | Principal Remaining | Not discarded | No change | No change | |
| TRUE | TRUE | Loan Balance | Discarded | 0 | Increased by the Interest Posted amount | After the rescheduling of the loan, the Maintain Delinquency flag is set to FALSE. |
For more information on Rescheduling, see the Reschedule a CL Contract section of this guide.
Accruals
Why do the accruals seem to be calculated even after the loan is closed?
The system calculates accruals and posts accrual entries even for contracts where the status is Closed-Obligations Met. However, the accruals will not be calculated if the contract Invalid Data is true or the accrual entry stop indicator is True.
To understand this, let's suppose the loan is closed in the middle of the month, but the accrual is to be calculated at the end of the month. In such a scenario, the system waits till the end of the month to create an entry for the remaining amount from the previous accrual entry. After that, the system sets the Next Accrual Entry Date to the maximum date, which is decided as December 31, 3000. Similarly for daily accrual, the system creates one for the next day after which it sets the Next Accrual Entry Date to the maximum value, which is December 31, 3000. However, in the case of daily accrual, the next day would not have anything to accrue and so it will be zero.
For example, if the loan is closing on April 15, and on the last month, March 31, the Next Accrual Entry Date was set to April 30, on which the accrual entry would get created. So, on April 30, the Next Accrual Entry Date is set to a max date, December 31, 3000.
The system cannot set the Next Accrual Entry Date as null as the system will encounter a NullPointerException. Thus, it was decided to set it to a maximum date such as December 31, 3000.
For more information on accruals, see the Accrual Entry section of the CL Loan Administration Guide, and the Interest Accrual section of this guide.
EOD Schedules
Why does the IPT amount not seem to match with the interest amount in schedules when Payment Frequency is Single Payment and Accrual Type is Accrual Through Date?
This is because the schedules do not consider the maturity date for the last interest amount. On the maturity date, before the EOD IPT job, if you make a payment equal to the bill amount or payoff, it creates an IPT of type Excess PayOff that matches with the schedules and the loan closes successfully. IPTs and bills are satisfied. But if you skip this payment and run the EOD IPT job, the system includes the next day's interest too. So if the payment is made after the EOD IPT job is run, then the system considers the interest for the maturity date too, which will not match with the interest on schedules.
Example: EOD Schedules when Payment Frequency is Single Payment and Accrual Type is Accrual Through Date
Let us say we have an EOD lending product with the following details:
Lending Product | |
|---|---|
Accrual Type | Accrual Through Date |
Payment Frequency | Monthly |
Time Counting Method | Month and Days |
Interest Posting Frequency | Monthly |
Is Interest Posting Enabled | True |
Is Capitalization | True |
Compounding Interest | True |
Compounding Frequency | Monthly |
Let us say we create an EOD loan contract from the preceding lending product with the following details:
| Contract Details | |
|---|---|
Loan Amount | $10,000 |
Interest Rate | 12% |
Interest Posting Frequency | Monthly |
Payment Frequency | Single Payment |
Maturity Date | October 3, 2019 |
Contract Date | June 3, 2019 |
On June 3, 2019, say, the loan is disbursed.
On July 3, 2019, an EOD IPT gets generated with the interest of $101.92 (Interest Posted = 10,000 * 12/100 * 31/365 = 101.92).
When a payment is not made on the maturity date, the system generates the IPTs as follows:
| Interest Posting Transactions |
|---|
|
The total Interest Posted as on October 3, 2019, is 101.92 + 102.95 + 104.1 + 101.68 = $410.65.
The system keeps posting interest till the loan is closed.
And the amortization schedule generated for a single payment loan is:
| Amortization Schedule |
|---|
|
The Due Interest amount of $407.17 does not match with the $410.65.
407.17 is calculated considering the Compounding Interest to be true.
The bill generated is:
| Bill |
|---|
|
If a payoff has to be done, it has to be in the amount of $10,407.17, but this does not match the (total interest posting amount + Loan Amount). This is because if you do not make a payment before the EOD IPT job runs, then the system includes the next day's interest too. However, if you had made a payment equal to bill amount or payoff before the EOD IPT runs on October 3, 2019, then the system would have created an IPT of type Excess PayOff (not Regular) that would then match with the schedules and loan would have closed successfully with the IPTs and bills getting satisfied.
Floating Rate Revision
Does the floating rate revision continue even after the maturity date of the loan?
Floating rate revision does not continue on its own post maturity. This means that the floating rate does not change automatically after maturity and requires manual intervention. A manual intervention such as restructuring, or changing the maturity date.For example, say a contract is created with the following terms and conditions:
| Contract Start Date | January 1, 2020 |
| Floating Interest Rate | 12% |
| Term | 12 |
| Maturity Date | December 31, 2020 |
After the rate revision in the last quarter of the contract life, that is, on December 1, 2020, the Floating Rate Revision Date gets updated to the maximum date, December 31, 3000, and as a result, the floating rate revision does not continue even if the contract is still not paid off.
In other words, if a contract has breached the maturity date, the system does not decide the future of the loan on its own. There has to be a manual intervention to decide the next steps on the loan. Ideally, if the lender expects the loan to function with or without maintaining delinquency after the maturity date, it is a normal practice to restructure or reschedule the loan at that point, thus allowing the user to either set up the rate revision dates again, or extend the maturity date of the loan, or change the future expected payment structure of the loan (as would have been agreed with the borrower). At that point, the schedule would ideally be regenerated on the outstanding loan balance.
For more information on Floating Rate, see the Floating Rate Index section.
Loan Closure for Revolving FIT Loans
How to keep a revolving FIT loan from not getting closed
Closure of revolving loans depends on the following:
Funding Stop Basis: If Funding Stop Basis = Draw Period End Date (set on the product), then till this Draw Period End Date, the loan keeps revolving and is not closed. The loan status does not change to Closed-Obligations Met, and the status of the loan is in Active Good Standing.
Draw Period.
Payoff: When payment > payoff, the loan gets closed if Funding StopBasis is not set to Draw Period End Date.
Draw Period: The period over which the total amount is disbursed.
Draw Period End Date: This is the date till when the loan keeps revolving and does not close. It is set on the contract and decides whether we want to close the loan or not. Draw Period End Date should be at least one day less than the maturity date.
A loan cannot be closed on or before this date.
If the current System Date is <= Draw Period End Date, then the status of the loan is in Active Good Standing.
If current System Date > Draw Period End Date, then the loan is closed and status changes to Closed-Obligations Met.
If you do not set Funding Stop Basis = Draw End Period, then it follows the existing functionality and closes the loan.
Repayment Start Basis starts from Draw Period End Date if Draw Period End Date is selected.
- Funding Stop Basis: This is the date until when you can disburse the amount.
Interest Calculation
Upto how many decimal places do we calculate interest?
It's configurable. You can provide the number of digits that can come after the decimal point. The default is 2, but the system allows any value.
For more information, you can refer to these links:
Rounding off: https://confluence.q2ebanking.com/display/QLSUGFSLSR/Rounding+Off
The Nearest with carried over Rounding Method: https://confluence.q2ebanking.com/display/QLSUGFSLSR/The+Nearest+with+carried+over+Rounding+Method
Create a Simple Loan Product: https://confluence.q2ebanking.com/display/QLSUGFSLSR/Create+a+Simple+Loan+Product
Interest Calculation: https://confluence.q2ebanking.com/display/Q2LSUGSLTR/Interest+Calculation
General
What is the difference between Next Due Date and Next Due Generation Date?
The Next Due Date is the date when the bill is due whereas Next Due Generation Date is the date on which the bill will be generated. Next Due Generation Date can change if there is Pre Bill Days defined in the system. For example, if the bill was to be generated on February 15th and if the Pre Bill days is defined as 3, then the Next Due Generation Date will be February 12, and the bill will get generated on February 12.