Loans Boarded by a Partner Financial Institution, and Bought Back by the Lender

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Loans Boarded by a Partner Financial Institution, and Bought Back by the Lender

The process of funding a loan through a partner financial institution and then buying the loan back to service is referred to as a loan buy back.

Lenders can now manage the boarding, disbursal, and buy back of loans from Buyback Process tab, in the CL Loan application.  They can specify the Buyback Parameters for the relevant loans within the Loan Details page. 

The buy back process comprises of the four major tasks, which are as follows:

  1. Configuring the buy back settings on the GL accounts.

  2. Boarding the Loan for the buy back process.

  3. Disbursing the loan.

  4. Validating the complete buy back process.

Prerequisites

The following is the prerequisite to starting the process of a loan buy back:

  • The loan contract is approved to start the buy back process.

Boarding the loan for the buy back process

Perform the following steps to board the loan, and to start the buy back process:

  1. Log in to your Salesforce account.

  2. Create a new loan contract.Select a loan product which has the pre-paid fees and the buy-back specific GL accounts associated with them.

  3.  Approve the loan contract.

  4. Go to the Details page of the Contract and scroll down to Buyback Parameters.

    • Select the Buyback Status as Not Yet Boarded, if it is not selected by default.

    • Select the Include in Buyback Process check box to include the contract in the buyback process.

    • Specify the Origination Bank Fee Share.

    • Specify the Interest Service Fee.

    • Click Save.

      5. Select the Buyback Process tab to take the contract through the various buyback steps.

    • Select the Board Loans link to select the loans, and click Board.

    • Verify that the buyback status for the contract has changed to Boarded under the Buy Back Parameters section of the loan contract details page.

Disbursing a loan

Perform the following steps to disburse the loan under the contract, and under the buyback process:

  1. Perform the loan disbursal transaction in the Loan Contract.

    1. Select New Loan Disbursal from the Transactions tab.

    2. Ensure that, the transaction amount is sum of the pre-paid fee and the disbursement amount.

    3. Click Save.

       2. Perform the Disburse Loans action in the Buyback process.

    1. Select the Disburse Loan link, and then, select the contract to be disbursed.

    2. Click the Disburse button.

    3. Verify that the buyback status for the loan contract has changed to Disbursed By Bank under the Buy Back Parameters section of the loan contract Details page.

    4. Run the LoanBuyBackAccounting Job in the Developer console to create the Disburse Loan accounting.

Validations for a complete buy back process

Perform the following steps to validate the bank transactions, GL entries, and the loan actions  for a complete buy back process:

  1. Validate the Buy Back transactions.

    1. Under the Transactions tab, click Other(s) tab to see the Buy Back transactions. Two transactions for the two buy back transactions would be present.

    2. Click on the latest Transaction ID to verify the buy-back transaction.

    3. The Fee Details shows the proper split between the Origination Fee and the Interest Service Fee.

    4. The Accounting transactions are created and available for viewing under Transactions>Other(s)>Transactions>Select the Accounting Transaction ID.

       2.  Validate the Buy Back Disbursed GL entries, for example:

Account DR CR

Fee Unearned Income

Origination Fees (Pre-paid Fees)

Fee Prepay

Bank Service Fees

Product Asset

Origination Fees – Bank Service Fees

       3. Perform the Buyback Loans action in the Buyback process to complete the buy-back process of buying the loan back from the partner bank.

    1. Select Buyback Loan link, and then, select the contact to buyback.

    2. Validate that the buyback status for the loan contract has changed to Loan Buy Back.

    3. Run the LoanBuyBackAccounting Job in the Developer console to create the Buyback Loan accounting transactions.

       4. Validate the Buy Back transactions.

    1. Under the Buyback Parameters section in the contract, the Buyback status displays as Buyback complete.

    2. Click Other(s) tab under the Transactions tab, to see the buy back transactions. The transactions for the buy back are present.

    3. Click on the latest Transaction ID to validate the Buy Back Details in which the New Buy Back status has changed to Buyback Complete.

    4. The Fee Details show the correct Fees, and the Purchase Price of the contract.

    5. The Accounting transactions are created and are available for viewing under, Transactions>Others>Transactions>Select the Accounting Transaction ID.

    6. Validate the Buy Back Completed GL entries for example:

Account DR CR

Product Purchase Payable

Loan Amount

Product Purchase Receivable

Loan Amount

Product Loan Control

Loan Amount

Product Asset

Loan Amount + Interest Accrued – Interest Service Fees

Product Interest Expense

Interest Accrued

Product Service Fee Income

Interest Service Fees

Field reference

Field Name Description

General Ledger Account

 General Ledger Account maintains an organization's accounting records. It includes accounts such as current assets, fixed assets, liabilities, revenue-expense items, gains and losses. 
Approved Approved is a status on the lending account which indicates that the loan has been sanctioned.
New Loan Disbursal Transaction The disbursal transaction of the loan amount to the borrower.
Q2 Loan ServicingUser Guide for Simple Loans

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