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Oracle Loans User Guide
Release 12.1
Part Number E13646-04
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Creating A Loan

This chapter describes how to create and update a loan.

This chapter covers the following topics:

Using Oracle Loans

Oracle Loans supports the entire loans management life cycle, from loan origination and approval, to servicing and eventual loan payoff.

Use Loans to:

Oracle Loans within the Oracle E-Business Suite

Loans is seamlessly integrated with other applications within the Oracle E-Business Suite to facilitate all aspects of loan management.

For example, Loans automatically integrates with:

Using the Loans Dashboard

The Loans dashboard is your virtual "home" within the Oracle Loans application.

Use the dashboard to:

For additional information, see: Using Oracle Loans.

Creating a Loan

Use Oracle Loans to create and track loan applications, from origination to payoff.

Creating a loan involves two processes:

  1. Creating the loan application.

  2. Adding details to the application. See: Updating a Loan.

To create a direct loan application for a borrower

  1. From the Loans dashboard, click Create Loan.

    See: Using the Loans Dashboard.

  2. Enter the general loan information.

  3. Enter the borrower information by searching for an existing borrower. If the borrower does not exist, you can:

  4. Enter loan details, such as:

  5. Enter the rates.

    Select an index type, payment frequency, interest rate index and effective date. Loans defaults the index rate percentage based on the index rates you set up in Loan Administration. You can override the defaulted index rate if necessary. See Setting Up Interest Rates.

    The interest rate for the loan is the total of the index rate percentage and the spread percentage, if any. If the loan has multiple interest rates, the interest rate percentage is the initial interest rate for the loan.

    Select the payment frequency for the loan.

    Note: When you first create a loan application, the term type is fixed. To create a variable rate loan, update the interest rate on the Origination tab after you save the application. See Updating a Loan.

  6. Click Save and Add Details. Loans creates the application and navigates to the Origination tab, where you can update the application. See: Updating a Loan.

    Or, click Apply. Loans creates the application and navigates back to the dashboard.

    Note: When you create an application, the loan status defaults to Incomplete.

To create a loan application from an existing receivable

  1. From the Loans dashboard, click Create Loan.

    See: Using the Loans Dashboard.

  2. Enter the general loan information.

  3. Select a borrower for the loan and then add one or more outstanding receivables. The outstanding receivables must be in the same currency as the loan.

    Enter the amount of each receivable that will be used to create the loan. The amount cannot exceed the current receivable amount.

    Click Derive to pull in all transactions that match the rule setup based on the selected loan product and customer in the loan creation page. The balance amounts on the transactions will be used to create the payment plan.

    Note: When you create a loan for an existing receivable, Loans will automatically adjust the original receivable with the amount of the loan. See: Approving a Loan.

  4. Add the borrower details.

  5. Enter loan details and terms, such as:

  6. Enter the rates.

    Select an interest rate index and effective date. Loans defaults the index rate percentage based on the index rates you set up in Loan Administration. See: Setting Up Interest Rates.

    The interest rate for the loan is the total of the index rate percentage and the spread percentage, if any. If the loan has multiple interest rates, the interest rate percentage is the initial interest rate for the loan.

    Select the payment frequency for the loan.

    Note: When you first create a loan application, the term type is fixed. To create a variable rate loan, update the interest rate on the Origination tab after you save the application. See: Updating a Loan.

  7. Click Save and Add Details. Loans creates the application and navigates to the Origination tab, where you can update the application. See: Updating a Loan. Loans automatically adjusts the original receivable when the completed loan application is approved. See: Approving a Loan.

    Or, click Apply. Loans creates the application and navigates back to the dashboard.

    Note: When you create an application, the loan status defaults to Incomplete.

Updating a Loan

From the Loans dashboard, click a Loan Number to update a loan.

When you first create a loan application, the status is always Incomplete. After a loan is approved, the status is Active.

If the status is Incomplete and you click the Loam Number from the dashboard to update the loan, then Loans navigates to the Origination tab. Use the Origination tab to enter all required information before you can approve the application.

Note: If the loan status is Active, Delinquent, Default, or Paid-off, then clicking Update takes you to the Servicing Center. See: Servicing Center.

If the loan status is In Funding, then clicking the Loan Number takes you Funding. See: Funding.

To access information about the borrower for the loan, click the borrower name hypertext link. See: Viewing Borrowers.

To complete a loan application, use the Overview area on the Origination tab. See: Overview.

Use the other areas on the Origination tab to enter additional information about a loan:

Finally, when the application is completed and ready for approval, use the Approval area. See: Approving a Loan.

Note: Throughout the Origination tab, you can click Save or Apply:

Loan Overview

The Overview area includes the following sections:

General

Use this section to update basic loan details.

When you create an application, Loans automatically populates this section with all required values. Note that before you submit the application for approval, you can update any defaulted values.

The General section includes the Loan Status History region, which documents all status changes for this loan.

Selected Terminology

Rates

Use this section to update details regarding this loan's:

Selected Terminology

Interest Only - Select this check box if this an interest-only loan.

Days Formula - Determines the number of days in a period when calculating interest. This value defaults from the Day Count Method system option. See: Setting Up System Options.

Payment Start Date - Loans defaults the payment start date based on the loan start date and payment frequency that you specify for a loan. You can change this date to any date within the term of the loan.

Reamortize Overpayments - Select this check box if you want to recalculate the amortization schedule when borrower remits overpayments.

Delinquency Condition: Amount Past Due - Loans defaults the monthly payment amount from the initial Amortization Schedule as the amount over which the loan is considered past due. You can change the amount. This field does not update automatically if the monthly payment amount for the loan changes. You must manually adjust the Past Due Amount.

Fees

You can add applicable fees to this loan.

To add a fee, click Add Fee, then select a fee and add required details.

You can add the following types of fees:

Note: You must create fees before you can add them to a loan application. See: Defining Loan Fees.

Memo Fees

Some fees are not billed and do not have any accounting impact in the general ledger through Loans. To view these fees in Loans, you can add a memo fee to a loan.

For example, an outstanding receivable that you create a loan for might have already accrued interest. You can add a memo only fee for the preaccrued interest, and indicate how you want the fee to be represented in the repayment (amortization) schedule that you provide to the borrower:

With memo fees:

Event Based Fees

You can add an event based fee to a loan if you want Loans to automatically bill the fee when a loan event occurs. The events that can trigger billing a fee are:

For event based fees, Loans cannot display the fee amount in the list of fees assigned to a loan until the event trigger has occurred and the fee is billed. For example, you can view the amount of a late fee only after payment is not received on time for a loan and Loans bills the fee.

Manual Fees

Add a fee manually to a loan in Servicing. A manual fee is billed with the next payment number for a loan. For example, you can add a fee for insufficient funds charge.

To bill a manual fee, you must first add the fee to a loan in Origination. You can add a fee before or after the loan is active. Then, when you need to bill the fee, such as charging the borrower for insufficient funds, add the manual fee in the Fee Details area of Current Amortization. You can view billed manual fees in the payment detail for a specific payment.

Recurring Fees

Add a recurring fee to a loan to bill a charge over a number of loan installments. Recurring fees are billed at the same time as the monthly installment. You can view the fee amount in the amortization schedule and in the payment detail for a specific payment.

Managing Fees

You can view all fees assigned to a loan in Origination. You can view billed fees in the Amortization Schedule and in Payment Detail for a specific loan payment in Servicing.

Based on setup parameters, you can edit fee amounts or billing options after fees have been added to loans.

When you assign a fee to a loan, you can update the accounting flexfield for the fee's credit account. These changes affect the accounting information for this loan only.

You must enter a credit in Receivables if you need to change a fee that has been billed with a loan. You can view credits in Payment History.

Run the Fee Assessment program daily to identify event based fees

Conditions

You can add conditions that the loan must meet. For example, you can add conditions that an application must satisfy before a loan can be approved.

To add a condition, click Add Conditions, then enter the required condition details. You can add multiple conditions at once.

Note: If a loan is set up to be converted to a permanent loan, you can add conversion conditions to it. All such conditions must be met by the borrower before the loan can be converted.

You can update a condition before a loan is approved by selecting a different condition type or name.

Note: You must create conditions before you can add them to a loan application. See: Defining Loan Conditions.

Amortization

Oracle Loans uses the information that you provided elsewhere in the application to automatically calculate the amortization schedule for this loan.

You can:

After the loan is approved, you cannot update the original amortization schedule for a loan shown on the Origination tab. You can view the current amortization schedule from the Servicing tab.

See: Viewing Current Amortization Schedule.

For a description of memo only fees, see: Fees.

Customizing the Amortization Schedule

Follow these guidelines when customizing the amortization schedule. Click Save to refresh the data shown on the schedule.

Once you customize the amortization schedule for a loan, you must manually maintain any changes. For example, if the loan start date changes for a loan with a custom Amortization Schedule, you must manually change the dates in the schedule. For active loans, you can only update the amortization schedule for unbilled loan installments.

Manual Bills

If possible, avoid creating a manual bill for a loan with a custom Amortization Schedule. If you create a manual bill, you must actively manage the remaining principal balance of the loan.

If the balance of a loan is less than the remaining principal to be billed shown on the customized Amortization Schedule, then the scheduled billing will not occur. Create a manual bill for the remaining principal, interest, and fees, if any.

Paying Off a Loan with a Customized Amortization Schedule

You cannot calculate and process a loan payoff if a loan has a custom schedule. Instead, you must manually calculate the loan payoff amount and update the next unbilled installment in the Amortization Schedule with the payoff amounts.

Notes

Using Oracle Notes, you can add comments to loan information, such as your notes about customer interactions, about why you approved or rejected the application, or why you modified a fee amount.

Note: See: Overview of Oracle Notes, Oracle Common Application Calendar User Guide

Related Loans

Use this section to obtain an overall sense of the borrower, co-borrower, and guarantor's financial exposure from a loan perspective.

This section displays any existing loans that are related to the current loan, via:

Viewing Borrowers

You can access Borrowers to view all information about the borrowers for a loan including the primary borrower, co-borrowers, and guarantors:

You can perform these tasks related to borrowers:

Creating a New Organization

Create a new organization to add a new borrower, co-borrower, or guarantor to the Oracle Trading Community Architecture Registry. The new organization appears on the Borrowers page and you can select the role of co-borrower or guarantor.

Related Topics

Viewing Borrowers

Adding Borrowers and Guarantors

Using Oracle Loans

Adding Borrowers and Guarantors

You can optionally add co-borrowers and guarantors to this loan.

This table describes the difference between co-borrowers and guarantors:

Type Description
Co-borrower Although bills are sent to the primary borrower on this loan, co-borrowers are equally responsible for loan payments, should the primary borrower default on the loan.
Guarantor The Guarantor may be contacted if the primary borrower and any co-borrowers stop making payments and cannot be located.

To add a co-borrower or guarantor, click Add Another Row on the Borrowers page and search for the organization in the TCA Registry.

After finding the organization, you can update the existing organization with new details.

To create a new borrower, co-borrower or guarantor, click Create Organization.

You can change the contact for the primary borrower from the Borrowers page.

Creating Assets

You can create assets for borrowers, co-borrowers, and guarantors. Assets are then added as collateral for a loan and reviewed during the loan approval process. See: Adding Collateral.

If the purpose of the loan is to acquire an asset, the new asset must also be created as part of the borrower's information. For example, if a borrower is applying for a loan to purchase a piece of commercial property, then create an asset for the property and enter the associated loan number in the Acquired For field.

The following table show the classes and types that Loans provides to group assets.

Class Types
Machinery and Equipment Commercial, Personal, Others
Real Estate Land, Property, Personal, Others
Securities Bonds, Personal, Stocks, Others
Others Agricultural, Cash, Others, Personal

You can define additional values for class, type, quantity, reference fields as needed for your business process. If you define a new class, you must also define the quantity and reference lookup values for the class.

You can enter a custodian or lien holder information for the asset by searching for a party or creating a new organization.

You can update asset information throughout the life of the loan.

Note: When you make updates to existing assets, changes are reflected in the History section. The Pledged Amount section reflects all pledged amounts.

Selected Terminology

Adding Collateral

You can add collateral for a loan. Collateral is required if the loan subtype is Secured.

Collateral consists of a list of assets belonging to the borrower, co-borrowers, and guarantors that support the loan. A lender can seize the collateral if the borrower defaults on the loan.

You must add an asset to a borrower's information before you can add it as collateral for a loan. See: Creating Assets.

When you search for assets to add as collateral, only assets in the same currency as the loan currency are available.

You can pledge some or all of an asset's value for a loan.

To remove an asset from an active loan, you must first pledge additional assets to fulfill the loan to value ratio before you can remove the asset.

When a loan is deleted or rejected, the acquired asset or pledged amount towards collateral will be removed.

Selected Terminology

Disbursing a Loan

While the loan type defines if a loan has single or multiple disbursements, the loan product specifies the number of disbursements for a multiple disbursement loan. The loan type also indicates whether a multiple disbursement loan can be converted to a permanent loan after the final disbursement.

Creating a Disbursement Schedule

Create a disbursement schedule for loans disbursed in multiple payments. To create a disbursement schedule:

  1. Click the Loan Number and navigate to the Disbursement tab.

  2. The disbursement schedule is populated with activity name(s) defaults from the Loan Product. You can add additional payments or modify information in existing rows.

  3. Specify a target date of disbursement of the part payment and the loan percent to be disbursed.

  4. Add Payees if the repayment is made by a party other than the borrower. For more information, see: Adding a Payee.

    Note: The borrower is the default payee.

  5. You can associate optional or mandatory conditions to each disbursement activity.

    Note: These conditions are in addition to those that may have defaulted from the Loan Product. If these conditions are marked mandatory you cannot override them. If they are updateable, you can modify or delete them.

  6. Optionally, associate fees to be paid with each disbursement.

    Note: These fees are in addition to those that may have defaulted from the Loan Product. If these fees are marked mandatory you cannot override them. If they are updateable you can modify or delete them.

Adding a Payee

Add payee information to disburse the funds for a direct loan when it is approved. A payee can be the borrower or a third party such as an escrow company. Oracle Loans integrates with Oracle Payments to disburse funds.

To add a payee, you can select from the list of existing suppliers in Payments or create a new payee. All new payees are automatically entered into Payments.

Tip: For frequently used payees, such as escrow companies, set up payees as suppliers in Payments with a supplier type of Third Party Closing Company or other supplier type that you define.

No changes can be made to payee information after submitting the loan funding advice. However, in multiple disbursement loans, you can make changes to the Bank and Payment method for each payee before the fund disbursement.

Selected Terminology

Credit Review

Oracle Loans integrates with Oracle Credit Management to perform credit reviews for loan application requests and decide to approve or reject it. The Credit Review option is set at the Loan Type level. You can either create a loan with a loan product that requires credit review or request review while creating or updating a loan. You must complete as much of the application including recording assets, financial data, co-borrowers, guarantors and other loan details to request credit review.

Once set for review and saved, you cannot remove the credit review requirement. After selecting the Credit Review option, the Financial Data subtab on the Borrower tab appears and you can view, create, update or copy financial data that may exist in another Credit Management case folder or loan application of the current borrower. You can also run a multi-statement comparison by clicking Compare. The credit request is submitted from the Approval tab. You must setup checklists with all possible combinations of Credit Review Type and Credit Classification in Credit Management before submitting a Credit Review request. Separate credit requests are created in Credit Management for Primary Borrower and co-borrowers using the Credit Review Type defined on the loan product. Guarantor credit requests are created with a reference to the primary borrower's credit request as the parent.

Once you submit a loan for Credit Review, it is frozen and cannot be updated. After credit review is completed, the status of the loan application changes to Incomplete: Credit Reviewed and you can view the credit review details. You can continue to update the loan and the loan status will change to Incomplete: Pending Credit Review. You'll need to resubmit it for Credit Review which will create new credit requests with reference to parent requests.

Note: If the loan type for a loan requires a credit review, you can submit the loan application for approval only after the credit review process is complete.

Completing Loan Application after Credit Review

For further information, see: Oracle Loans Integration, Oracle Credit Management User Guide

Approving a Loan

On the Approval tab, review any mandatory conditions that must be met before you can submit the application for approval.

For each condition, you can also add attachments so that, when a loan manager completes the application review process, any required documents are available online for easy access.

In loans with multiple disbursements, the disbursement schedule must be verified before submitting the application for approval. The disbursements must equal 100 per cent.

Use the Funding Option check box to automatically disburse funds when loan is approved. Otherwise, Loans uses the prioritized funding process.

Select the Completed boxes to indicate that mandatory conditions are met. Then, click Submit for Approval.

In loans with Credit Review set to Yes, ensure all the required conditions are met and Fulfillment date is filled. Click Submit for Credit Review.

The loan status changes to Pending Approval, and the application requires a loan manager's review. The manager can approve or reject the application, or ask for additional information:

Viewing Accounting Events

The Accounting area lists the GL accounts that are used for:

Loans uses default rules to establish the accounting for a loan. For a description of these rules, see: Setting Up Accounting.

After loan approval you can view the accounting events history and verify journal entries using the view Accounting Events link on the Accounting tab. You can also run Online Accounting programs like:

Note: To view accounting for Loan Payable, Loan Liability in Accounts Payable, you must run Create Accounting program in Accounts Payable.

Note: To view accounting for Billing, you must bill loan apply receipts, run Create Accounting program in Accounts Receivable.

Using Notifications

Use notifications to automatically inform loan agents and managers about critical events that occur during the life of a loan. When the status of a loan changes, a business event is raised in Oracle Workflow, which then sends a notification to the recipient based on user roles.

Each notification event is associated with a loan class and type. Loans seeds and enables notifications for the combinations of loan class and type shown in the following table.

Loan Class Loan Type
Extended Repayment Schedule Extended Repayment Schedule
Direct Loan Agriculture
Direct Loan Business
Direct Loan Real Estate

Note: If you add loan types, you must enable the workflow and business events by linking the new loan type to the seeded workflows. To do this, you add the new loan type to the corresponding LNS_EVENT_ACTIONS tables.

Note: You can disable notifications for a loan type or class. See Enabling Notifications.

Loans automatically generates the text for a notification based on the message parameters seeded in Workflow.

See: Oracle Workflow Administrator's Guide and Oracle Workflow User's Guide.

The five most recent notifications from your worklist appear in the Notifications section of the dashboard. A notification remains on your worklist until the due date of the notification or until you indicate you have reviewed the notification by clicking OK.

Tip: If you want don't want to delete the notification from the worklist or dashboard, then use the Dashboard link to return to the dashboard.

Select the Notification hyperlink to view the notification details. To navigate to the loan section associated with the notification and the most current loan information, select Loan Details in the Reference section.

Tip: You must perform several steps in Oracle Payables to process the funding request for a loan. See Loan Funding for more information.