Behavior of flexible amortization based loan products
In addition to the differences between amortization (AMZ) based and flexible amortization based loans listed in the preceding section, Amortization Based Loan Products, the following are some characteristic ways in which CL Loan processes flexible AMZ loans.
Payment application: Lenders can choose to apply the payments received from the borrower in the order of the spread defined for the lending product, or apply the exact amounts as per the bill, to reduce the amount remaining under each head.
Investor interest accrual and payout: In CL Loan 2.4008 and later, the Investor Interest Accrual job and Investor Payout job are run daily. These are not a part of start of day chaining and need to be scheduled after SOD is run. A flexible AMZ loan's LAD can change in two scenarios :
On interest posting, which happens on schedule date
As a result of any loan action like rate change or reschedule (excluding payment; at the time of payment flexible AMZ loan's LAD does not change)
The last accrual Date (LAD) for all active Investment Orders (IO), moves in sync with the related loans' LAD. Therefore, whenever the loan's LAD changes, IOs' LAD also changes.
| If | Then |
|---|---|
| The loan is disbursed |
IO accrual happens according to this formula : Interest accrued = investment share*time factor ratio*interest rate ratio*borrower interest accrued where,time factor ratio = (Days between max(IO start date, IO LAD) to sodDate) / (Days between borrower LAD to sodDate)interest rate ratio = IO certificate rate / borrower interest rate |
| The loan is not disbursed | Interest accrued in all its IOs is "0". |
| IO start date is after loan start date | The interest accrued is "0' till the loan start date occurs and interest starts accruing from the next day. |
| Loan's LAD changes (and subsequently IO's LAD) | Interest accrued on investor till new LAD is posted to the IO, and IO interest accrued is made to 0 on the new LAD. |
When LPT is cleared on Loan and Investor Payout job is run, only posted Interest on IO is paid to investor according to proportional payout method, based on payment received from borrower.
Interest paid to investor = (investor interest remaining(equals interest balance) / borrower interest remaining before payment) * interest paid by borrower
Interest on arrears (IOA) accrual and payout: IOA accrual and payout occurs through the Investor Interest Accrual job and Investor Payout job respectively. These jobs are scheduled to run daily after SOD job is run.
IOA accrual and posting is calculated based on Interest Posting Date. The interest posting happens on the schedule's due date. Loan actions like interest rate change or reschedule or payment do not affect IOA accrual or posting. For more information on calculation of interest on arrears, refer to section Interest on Arrears.
Prerequisite for IOA Accrual :
While creating Flexible AMZ contract, interest rates on due Principal/Interest/IOA is specified as a non-zero value.
When an investment order is created, interest rates on due Principal/Interest/IOA is specified as a non-zero value.
Prerequisite for IOA Payout :
Make a payment spread with all 3 IOA components as a part of spread.
Open IOAs on the loan contribute towards IOA amount to be accrued on investor and closed IOAs contribute towards IOA amount to be posted on investor.
| If / When | Then |
|---|---|
| There are no open IOA on loan | IOA accrued in all its IOs is "0". |
| IO start date is after the loan start date | IOA accrued is "0" till the loan start date occurs and IOA accrual starts from the next day for open IOAs |
| Interest posting is done | IOA accrued on investor till the interest posting date is posted to IO. The IO's IOA posted and IOA accrued is made "0" on interest posting date. |
| LPT is cleared on the loan with IOA present in the LPT spread, and Investor Payout job is run |
Only posted IOA on IO is paid to investor according to proportional payout method, based on the IOA amount paid by borrower IOA paid to investor = (investor ioa remaining(equals ioa posted - ioa paid) / borrower ioa remaining before payment) * ioa paid by borrower |