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

This chapter describes how to service a loan.

This chapter covers the following topics:

Overview of Servicing Loans

Use the Servicing tab to access information and perform servicing tasks for existing loans.

The Servicing tab includes two areas:

Servicing Center

The Servicing Center provides information for a loan that you select from the Loans dashboard or from a basic or advanced search. You can service loans with a status of active, delinquent, or in default. Most collections activities and troubled loan status changes are handled through Oracle Advanced Collections functionality. You can view paid-off loans for historical purposes.

The Servicing Center displays the most current interest rate, loan balance, and billing information for a loan.

If you use Oracle Advanced Collections:

You can run Oracle Advanced Collections scoring engines to identify delinquent loan payments and automatically update loan status based on the Amount Past Due value specified in the Delinquency Conditions for a loan.

For information about updating loan status, see Updating Loan Status.

Using the Service Center:

The Servicing Center includes the following sections:

From the Servicing Center, you can quickly:

Note: During loan servicing, if you choose to adjust loan invoices, Loans only recognizes negative adjustments which account for loan payoffs. You cannot make positive adjustments to an existing loan account.

Loan Overview

Summary

In the Summary section, you can view basic loan information including loan start date, loan class and type, term, loan amount, and loan officer for the loan.

Payment Overview

The Payment Overview section shows the next payment due for the loan. This payment was created when the billing program was last run for the loan.

Payment History

In Payment History, you can view bills, credited bills, and payments received for the loan.

You can also view Payment History from the Current Amortization section of the Payments page, as well as from the Loan Summary page.

See also: Viewing Payment History.

See also: Overview of Loan Billing.

Payment Detail

Billing Summary shows the principal, interest, and fees billed for the loan.

Payment Summary shows amounts received for the payment number and the source of the payment.

Note: All invoices are due for immediate payment and therefore, the payment or installment number will always be 1.

Payment Activities shows payments for principal, interest or fees. In the description field, Entire Transaction means that the payment receipt was applied at the transaction level, not at the line level. It does not mean that the invoice was completely paid. This applies to transactions that follow multi-fund guidelines.

Loan History

Loan History shows events that have occurred over the life of a loan, including loan creation, approval processing, and changes in loan status.

Event information includes:

Using Reports

You can generate reports for loans by submitting a request. Each report uses a template to format the report. You can create and register additional templates or copy and modify existing templates, using XML Publisher.

To submit a report request, select Submit Request from the Dashboard.

Tip: If you add a report template, you can preview the report with sample data, if configured, to determine if the template meets your reporting needs.

For the Loan Portfolio Report and the Loan Reconciliation Report, you must specify the operating unit, loan class, loan type, and currency and then select additional parameters. For the Loan Agreement Report, specify the loan number. Report output can be in PDF, RTF, or a spreadsheet format.

Updating Loan Status

Loan status is determined by business events that occur throughout the life of the loan. These events can occur within Loans, such as loan approval, or outside of Loans, such as becoming delinquent. The status of a loan can be:

Oracle Advanced Collections and Loan Status

If you use Oracle Advanced Collections, it monitors when loan payments are due but not yet paid through standard integration with Oracle Receivables. Oracle Loans monitors business events raised by Advanced Collections when payments are late or when they are paid and leverages Advanced Collections' scoring engine to determine a change in a loan's status.

Oracle Advanced Collections and Oracle Loans use the amount entered in the Amount Past Due field when you set up a loan, to determine when a loan becomes delinquent or in default. When you create a loan application, Loans defaults an amount equal to the total due for a single monthly payment for a loan into this field. You may enter a different amount based on your business practices. Loans does not automatically update this amount if the interest rate or payment amount for the loan changes during the application process or during life of the loan.

The seeded scoring engine in Oracle Advanced Collections, Default Invoice Delinquency Management Engine, determines whether a loan transaction is delinquent, paid, or closed, and automatically raises a business event if a new delinquency has been created or an existing one closed. Using the Workflow Agent Listener concurrent program, Loans monitors the business events and compares the outstanding amount due for loan to the delinquency conditions defined when a loan is set up to determine and update the status for each loan. For example, if a monthly loan payment is $1000, then Loans determines a loan's status as shown in the following table:

Loan Amount Overdue Status
Less than $1000 Active
$1000 - $1999 Delinquent
$2000 and more In Default

Note: You must set the Advanced Collections profile option, IEX: Enable Raising Customer Status Change Event. Additionally, verify that the Workflow Agent Listener concurrent program is enabled. Oracle Advanced Collections generates a business event for each delinquency created or closed. Loans uses the business events to update loan status.

Optionally, you can create strategies for borrowers with delinquent or defaulted loans using standard Oracle Advanced Collections functionality. You must run strategies at the Party level as Oracle Advanced Collections does not currently provide loan-level strategies.

For information about how to run Advanced Collections scoring engines, see: Running a Scoring Engine to Update Loan Status.

For information about creating scoring engines and strategies to meet your business needs, see: Overview of Scoring, Oracle Advanced Collections Implementation Guide.

See also: Overview of Loan Billing.

Running Scoring to Update Loan Status

If you use Oracle Advanced Collections, you automatically update loan status in Loans by running the following programs.

See also: Updating Loan Status.

Prerequisites

To run a scoring engine in Oracle Advanced Collections

Parameters

Select the Default Invoice Delinquency Management Engine.

The Scoring Engine Harness program runs the scoring engine you select to score loan transactions to determine if there is a change in loan status based on unpaid loan amounts.

If you want to create your own scoring engine, components, and filters, see Overview of Scoring, Oracle Advanced Collections Implementation Guide. Your scoring engine must, however, create and close delinquencies in order to raise the proper business events.

  1. Use the Collections Administrator responsibility and select Request Submission.

  2. Select IEX: Scoring Engine Harness and enter the required parameters.

To run Workflow Agent Listener program

Parameters

Agent Name: WF_DEFERRED

Correlation ID: Null

AQ Wait Period: Enter zero or other value as needed.

  1. Using System Administrator responsibility, select Submit Request and click Open.

  2. Select Workflow Agent Listener and enter the required parameters.

Payments

Oracle Loans reflects all loan payments (receipts) that are entered and applied in Oracle Receivables. Loan payments can include:

From the Payments tab in Loans, you can:

Accounting for Loan Payments

When you enter a receipt for a loan payment bill, Receivables creates the following journal entry:

Payment

Debit		Cash
Credit		Principal Receivable
Credit		Interest Receivable
Credit		Fee Receivable

Note: Accounting information for billing and payments received for a loan is generated in Receivables and must be transferred to the general ledger.

See: Overview of Loan Billing.

Viewing Loans Transactions from General Ledger

After posting journals for loan billing from Receivables, General Ledger enables users to drill down to Receivables to view the source transactions for the journal entries.

See: Drilling Down to Oracle Receivables from Oracle General Ledger, Oracle Receivables User Guide.

Processing Loan Payoffs

You can calculate payoff amounts for a loan and automatically create the appropriate payoff documents. Loans generates invoices or debit memos in Receivables for the remaining principal and interest, and creates credit memos, if needed, to clear billed but unpaid interest. Loans applies the payoff receipts to these transactions, and updates the loan status to Paid Off. Receipts to pay off a loan can be in the same currency as the loan or the ledger.

Note: Only receipts in loan currency or GL Ledger currency will be shown under the Receipts for payoff. Amounts in the receipts will appear in the loan currency.

When a loan is paid off, Loans end dates any collateral pledges attached to the loan as of the payoff date.

Loan payoff affects the Current Amortization Schedule.

To pay off a loan:

  1. Calculate the loan payoff amounts.

  2. Notify borrower of total payoff amount.

  3. When payment is received, select Process Payment to view the payoff transaction amounts and add receipts.

  4. Submit the payoff request.

Calculating Payoff Amounts

The expected payment date for a payoff must be:

Using the days formula for the loan, Loans calculates the total payoff amount based on any billed but unpaid principal and interest for the loan, the payoff date, and the remaining principal balance.

Note: See: Interest Rates for information on day/count methods used in Oracle Loans.

Note: Oracle Loans does not support calculating payoff amounts in case of a customized amortization schedule.

Loans does not save calculated payoff amounts because a borrower may or may not remit payment or may send payment earlier or later than initially discussed. When you know that the loan payoff payment has been received by Receivables, recalculate the payoff amount for the date the receipt was recorded in Receivables and continue with the payoff process.

Viewing Current Amortization and Payment History

You can view payment history, memo fees, and the current amortization schedule for a loan in the Current Amortization section. You can also view fees scheduled to be billed and add manual fees to future installments.

Viewing Payment History

Consult the Payment History to view all loan payments (bills), credits (credited bills), and payments (receipts) received for a loan.

Payment History is also available in the Overview section of the Servicing tab. See: Payment History.

The Payment History displays the latest, unpaid loan balance when a bill is created, and then updates the loan balance after receipts are applied. Select Include Credited Bills to display payments (bills) that have been reversed.

For example, the table below shows the payment history for a loan of $1000. The monthly loan payment is $110. Three payments have been billed. Payment was received and applied for payment number 1 and principal balance reflects the applied principal amount for the payment. Principal balance for payments 2 and 3 is $900 because payment number 2 has not been received.

Payment Number Due Date Paid Date Principal Balance Amount Due Amount Paid Amount Remaining Source Credited
1 10-Jan 9-Jan 900 110 110 0 Scheduled No
2 10-Feb   900 110 0 110 Scheduled No
3 10-Mar   900 110 0 110 Scheduled No

The following table shows the change in principal balance when payment number 2 is received and applied. Principal balance for payment number 2 reflects the applied principal and is now $800. The principal balance for payment number 3 is $800 because a payment has not been received.

Payment Number Due Date Paid Date Principal Balance Amount Due Amount Paid Amount Remaining Source Credited
1 10-Jan 9-Jan 900 110 110 0 Scheduled No
2 10-Feb 8-Feb 800 110 110 0 Scheduled No
3 10-Mar   800 110 0 110 Scheduled No

When you create a manual bill, Loans does not update the principal balance amount shown in payment history schedule until payment has been received and applied.

Note: Payment history reflecting data from previous years list system date as the Paid Date not the original Receipt Date.

Selected Terminology

Due Date - The date payment is due for a bill

Principal Balance - Latest unpaid principal amount

Amount Due - The amount due for this bill

Amount Paid - Amount applied to the bill including receipts, adjustments, and credit memos for netting.

Amount Remaining - Amount due less amount paid

Credited - Indicates if the bill has been reversed.

Memo Fees Due Before First Loan Payment

Loans displays this section only if you create loans from existing receivables, and memo fees exist for the loan. Loans does not bill or generate accounting entries for memo fees.

Amortization Schedule

Use the Amortization Schedule to view current unbilled payments for a loan. Throughout the life of a loan, this schedule dynamically reflects changes to principal, interest, and fees due to events such as loan approval, interest rate changes, extra payments, short payments and late fees.

Each change in these parameters also triggers the amortization schedule to be recalculated. User can change the first payment date which also results in change in the loan repayment time for the loan. By default this date is defaulted to the 1 month after the loan start date. For example, if the loan starts on January 1 and lasts for 5 months, the maturity date will be June 1 and the first default payment date will be February 1. If user changes the first payment date to March 1 then there are will be only 4 payments till June 1, the maturity date of the loan.

The beginning balance for the first payment shown in the Amortization Schedule always reflects the latest unpaid loan balance. Loans calculates principal and interest based on the beginning balance amount. When a receipt is applied, Loans moves the payment to the Payment History section and updates the beginning balance for the first unbilled payment. The ending balance or the last payment does not reflect zero if there are unpaid bills.

Fee Details

The Fee Details table shows the fees scheduled to be billed with the payment selected in the Amortization Schedule. To add a fee, select Add Manual Fee and assign a manual fee to be billed with this payment number. To add a manual fee, you must first assign the fee to the loan. See: Manual Fees.

Outstanding Bills

From Outstanding Bills, you can view all unpaid loan payments (bills) for a loan. Payments with partial amounts applied will not appear on this screen.

You can also:

Creating Manual Bills

When borrowers remit overpayments, you can create a manual bill for additional principal amounts for the loan.

Note that you create the manual bill after you receive the receipt.

If a borrower remits an overpayment, first apply any regular loan payment amounts to outstanding transactions in Receivables. These transactions can include invoices and debit memos for principal, interest, and fees. Then create a manual bill for the overpayment amount in Loans. Finally, in Receivables, apply the payment to the manually created bill.

To create a manual bill

To create a manual bill, do not submit the LNS: Billing program. Instead, complete these steps:

  1. Click Create Manual Bill

  2. Click Add New Manual Bill.

  3. Enter the amount and date for the bill.

    Note: Loans defaults the current principal balance only in the amount field. If you are creating a bill for a purpose other than to pay off the loan, be sure to update the amount field with the correct amount.

    Loans associates the bill with the last outstanding payment number.

  4. Click Submit.

    Loans automatically creates a manual bill when you click Submit, and Receivables then creates the invoice for principal.

    Note: Manual bills, like other billing transactions, must be interfaced from Receivables to General Ledger. You will be able to drill down from General Ledger to Loans and view transaction details for a manual bill only after the interface program has been run.

To create a manual bill and apply receipts manually

To create a manual bill and add and apply receipts manually to the respective principal invoices, perform these steps:

  1. Create a Manual Bill

  2. To Add and Apply Receipts click Add Receipts Search for the Receipt Number.

  3. Select the Receipt to apply to the outstanding invoice.

Creating Credits

You can reverse an outstanding bill by crediting the bill.

When you enter a credit for a loan payment, Loans reverses the loan principal, interest, and fee amounts for the bill by creating credits in Receivables, and recalculates amortization to reflect the change.

You can credit only the most recent loan payment. You must credit the most recent loan payment first, because the credit affects amounts on the amortization schedule.

Credit and Rebill

Use Credit and Rebill to correct principal, interest, and fee amounts for a loan payment, after payment applications have been made in Receivables.

For example, a borrower's payment for loan payment 4 was incorrectly applied, and loan payment 5 was already billed. The receivables clerk then corrects the error for payment 4. You must credit and rebill payment 5 to recalculate the amounts due for principal and interest.

Select Credit and Rebill for the outstanding bill that you want to rebill.

In the example above, you can credit and rebill an outstanding bill only after the receivables clerk corrects payment 4. If you want the amortization schedule to accurately reflect the principal and interest for the loan before payment 4 is corrected in Receivables, then simply credit payment 5. You can submit the LNS: Fee Assessment and LNS: Billing program at a later time to rebill payment 5.

See: Submitting the LNS: Reverse Last Bill Program.

Related Topics

Overview of Loan Billing