Payments to investors

Overview

An amortization schedule is created for investors at the investment order level that provides a projection of the returns they would receive until the time the contract reaches its maturity. The return to an investor is made as per the certificate rate you agreed upon with the investor. The certificate rate is the rate of interest an investor earns on the invested funds. If there are multiple investors on a loan, they are paid based on the certificate rate and their share of investment. 

When Certificate Rate is different than the Interest Rate of the loan

There may be situations where the certificate rate of an investor is higher than the interest rate on the loan contract. In such situations, the weighted average method may be used to pay the investor as per the certificate rate, if the following conditions are met:

• The total investment on the loan by investors must 100% 
• The weighted average of the certificate rate of the IOs must be less than or equal to the interest rate on the loan contract.
• the last accrual date on the loan contract before clearing of the LPT must be the same as the last accrual date on the investment order before the ILT is created. If these dates are not same for some of the investors on a contract, for example, if an investor with certificate rate C4 is added to the loan contract after the last accrual date, then, the system calculates the interest as per certificate rate for the initial 3 investors, and as per the default method for the fourth.

For example, if certificate rates of three investors are C1, C2, C3 and share for these IOs are S1, S2, S3, then, the weighted average is calculated as: (C1*S1 + C2*S2 + C3*S3) / (S1+S2+S3). If this value is less than the interest rate on the contract and the other two conditions are met, the investors are paid as per their certificate rates.

If these conditions are not met, the default payout calculation is used, which is the minimum of: (Interest accrued on an IO + Interest Balance on the IO) and (interest component of the LPT as per the investor share %). Here, interest balance is computed as the difference in these two values, if greater than zero, and is marked to be paid in future. 

Also, in the case of Flexi AMZ loans, if the Certificate Rate of an IO (Investment Order) is higher than the Interest Rate on the loan contract, the interest calculated for the ILT (Investor Loan Transaction) is more compared to that of the LPT (Loan Payment Transaction). If the start date of an IO is greater (when an Investor is created after the loan contract Creation Date) than the loan Contract Creation Date, or if the Certificate Rate of an IO is less than the Interest Rate on the loan contract, the interest calculated on the ILT is less compared to the interest on the LPT.

Jobs 

Investment Order Interest Accrual Job

The Investment Order Interest Accrual Job is run independently (outside of the SOD-EOD process), to accrue interest for all investment orders on daily basis. It chains the Investor Payout Job to get executed next, which uses the interest accrual data to compute the investor payout amounts. The system calculates interest based on the interest calculation method set up on the loan contract. If interest calculation method is Flat, the entire investment amount is used to calculate Interest for investment orders. Else, interest is calculated on the remaining investment amount (declining balance method).

Investor Payout job

The Investor Payout job is manually run to process the payouts to investors. The job fetches all the loans with investment orders, where loan payment transactions exist, to payout the investors. 

For information on batch jobs, refer to chapter Batch Jobs.

Investor Payment

From funding a contract, to receiving borrower payments, up to paying returns to investors on their investments, fund movement is created between borrowers, lenders, and investors. With CL Loan you can maintain accounts internally and allow transactions with external accounts for investors, borrowers, and payment of taxes. For example, an internal investor fund account, or an advance account through which a borrower may be paid out.

Investors are paid out when a borrower makes a repayment on a loan, based on their percentage share in the loan amount, and after deducting service charges, as applicable. When the loan payment transaction of the borrower is processed, the details like Capitalized Interest, Interest Posted, and Next Interest Posting Date are updated. 

The interest paid out to the investors is calculated based on the payment received from the borrower, the certificate rate at which they have invested, and the interest accrued till the bill generation date. Lenders can configure the interest calculation option by setting the value of the IO Accrual Method field to "Proportional Interest" in the Fractionalization Parameters section of the CL Loan Administration Guide. As per this method:

Interest Paid to Investor = (Interest Accrued on Investor Account  / Interest Accrued on Contract) * Interest payment received.

Investor payment happens through the Investor Payout job. For more information on how the job processes the investor payments, refer to section Investor Payout Job. The total invested principal remaining for the investor is updated accordingly. The Investor Payout Job processes the oldest unpaid LPT that is created on the contract first. This ensures that principal is paid back to the investor in the order of the borrower payment received, and interest accrual for the investor is calculated correctly. For loans with multiple LPTs, there may be a scenario where, at the end of the Investor Payout Job, some of the later LPTs do not get processed for investor payout, as the job processes only the earliest LPT. In such cases, the lender needs to schedule the Investor Payout job for the skipped LPTs. The log of all such unprocessed LPTs is maintained in the Batch Job Logs, and can be viewed by executing a query through the Developer Console in Salesforce. A sample query is given here.

Select Id, loan_Messagec from loanBatch_Process_Log_c.

It is recommended to run the IO Interest Accrual Job prior to processing investor payouts, so as to process only the loans that have investment orders, for calculating the returns for investors on their investment orders. The accrued interest is reflected on the investment order details page. 

The investor funds are maintained within CL Loan in the investor's fund account. The investor can invest in loans from this available fund amount. However, to withdraw the funds, the investor must make a withdrawal transaction.

The payment to investor is calculated after deducting the applicable service charges, if any.

For example, consider a loan contract with the following terms:

Loan amount = 10,00,000

Investor funds = 500000, investor share in loan = 59.88%,

Investor's certificate rate = loan interest rate = 9%

Investor's Interest Weightage = 0.375

Service charge = 15%

Service charge applied on = Interest and Principal

Late fee = 100, investor share of fee = 70%

Then, CL Loan calculates the amounts payable to the investor as follows:

* Service Charge can be viewed in the Investor Loan Transaction Detail page.

** Remaining investor amount can be viewed under Investment Order Balance Details section of the Investment Order Detail page. 

Similarly, the funds available with the investor for investment are increased by this amount, as can be seen in the Investor (account) details page.

Run or Schedule the Investor Payout Job

Prerequisites

The following is the prerequisite to running or scheduling the Investor Payout Job.

• The IO Interest Accrual Job is run.

Manually Run the Investor Payout Job

Steps

Perform the following steps to manually run the Investor Payout Job:

1. Log in to your Salesforce account.

2. Click Servicing Configurations, User and Data, Batch Jobs.

3. Select Run Batch Jobs.

4. Select the Investor Payout Job.

5. Click Next.

   Note:

   This job has to be run exclusively as it is not part of the SOD chaining. When there are large number of Investment Orders and a lot of ILTs are to be generated, in such a scenario SoDs itself take a lot of time to complete. Due to which, the Investor Payout Job is not a part of SoD Chaining.

6.   Select Run.

Schedule the Investor Payout Job

Steps

Perform the following steps to schedule the Investor Payout Job:

1. Log in to your Salesforce account.
2. Click Setup.
3. Go to App Setup, Develop, Apex Classes. The Apex Classes page is displayed.
4. Click Schedule Apex. 
5. Specify the Job Name. For example, Investor Payout Job.
6. Select the Apex Class.
7. Select the Frequency, Date, and Time.
8. Click Save.