This chapter describes how to service a loan.
This chapter covers the following topics:
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.
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.
The Servicing Center includes the following sections:
From the Servicing Center, you can quickly:
View information about the borrower for the loan.
See: Viewing Borrower Summary.
Update information for borrowers and guarantors
See: Updating a Loan.
Review loan information, including:
Loan details
See: Basic Information.
Original amortization schedule
See: Amortization.
Current amortization schedule
Service loans:
Enter a new interest rate
See: Interest Rates.
Pay off a loan
See: Calculating Loan Payoffs.
Create a manual bill
See: Creating Manual Bills.
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.
In the Summary section, you can view basic loan information including loan start date, loan class and type, term, loan amount, loan officer for the loan, and so on.
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.
Summary: This section details the remaining amount and number of payments for the loan as well as the amounts of principal, interest, and fees paid since the loan began.
Next Payment: The Paid On Time Amount is the total amount of principal, interest, and fees due if the payment for this bill is received by the due date.
Overdue Payment: This section shows the total amount of overdue principal, interest and fees as of the last billing cycle, the date of the oldest overdue payment and the number of overdue payments. The Last Payment Amount represents the last receipt posted against a single transaction, so if you generate multiple transactions for principal, interest and fees, this amount only reflects the last of these transactions to be paid.
Year to Date: Total amounts paid by the borrower for principal, interest, and fees for the current calendar year.
Last Year: Total amounts paid by the borrower for principal, interest, and fees in the previous calendar year.
In Payment History, you can view bills, credited bills, and payments received for the loan.
To re-sort the Payment History table, click Payment Number, Paid Date, or Due Dates column heading.
You can view billing details for each loan payment by clicking the payment number hypertext link. If payment has not been received for the bill, then the Payment Activities section will be blank. See: Payment Detail.
You can view or print a statement for a loan payment. Loan statements provide information about the loan, borrower, paid amounts, and amounts due, in addition to delinquency details such as overdue amounts and the number of missed or short payments. Loans derives this information by reviewing all payments that are billed and due by the statement date, but have not yet been fully paid.
Loans automatically generates statements for each installment when the LNS: Billing programs is run.
Select Display Reversed Bills to display bills that have been reversed.
Principal Balance shows the latest outstanding balance.
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.
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.
Receipts - cash applied
Netting Credit Memos - from AR/AP netting process
Loan Payment Credit Memos - credit memos with a reason of loan payment
Other Credit Memos - usually credit memos canceling payments
Adjustments - adjustments created in Receivables, such write-offs
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.
Disable Billing and Accrual is enabled for Active, Delinquent and Default loans. If you select Yes in the Disable Billing drop-down list , then any kind of billing is disabled for the loan, including LNS: Billing concurrent program, Bill Next Installment button, Bill and Apply Next Installment button, Create Manual Bill button, Process PayOff button and Create Manual Bill link.
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:
Date of change
Change event that occurred for the loan, showing the original and new value
Loan agent who made the change, if involved
Role of agent
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.
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:
Incomplete - Loan application has been started but not completed.
Pending Approval - Completed loan application has been submitted for manager's approval.
Approved - Direct loan application has been approved and if using prioritized funding, is in funding queue.
Rejected - Loan application has been rejected.
Deleted - Loan application was withdrawn and not completed.
In Funding - Loan funding advice has been generated and is to be paid in Payables.
Funding Error - An error prevented funding from completing successfully.
Active - For Direct loan, loan has been approved and funded. For ERS loan, loan has been approved.
Delinquent - (available if you use Oracle Advanced Collections) Loan has an overdue amount equal to or greater than the amount entered for Past Due Amount on the loan application. This is typically one month's loan payment.
In Default - (available if you use Oracle Advanced Collections) Loan has an overdue amount equal to or greater than twice the Past Due Amount. Typically this amount equals two loan payments.
Paid Off - Principal loan balance has been completely paid.
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.
If you use Oracle Advanced Collections, you automatically update loan status in Loans by running the following programs.
Run Scoring Engine Harness in Oracle Advanced Collections to determine delinquent and in default loans.
Run Workflow Agent Listener in Loans to update loan status.
See also: Updating Loan Status.
Prerequisites
To run a scoring engine in Oracle Advanced Collections
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.
Use the Collections Administrator responsibility and select Request Submission.
Select IEX: Scoring Engine Harness and enter the required parameters.
To run Workflow Agent Listener program
Agent Name: WF_DEFERRED
Correlation ID: Null
AQ Wait Period: Enter zero or other value as needed.
Using System Administrator responsibility, select Submit Request and click Open.
Select Workflow Agent Listener and enter the required parameters.
Oracle Loans reflects all loan payments (receipts) that are entered and applied in Oracle Receivables. Loan payments can include:
On-time payments
Late payments
Short pays
Overpayments
Note: If your business uses AR/AP netting, loan payments can also include credit memos. You can identify credit memos applied for netting because the transaction number includes the prefix NET.
From the Payments tab in Loans, you can:
Calculate a loan payoff
See: Calculating Loan Payoffs.
View payment history
See: Viewing Payment History.
View memo fees for a loan
View current amortization schedule for a loan
Download amortization schedule
View outstanding bills
Create a manual bill for a payment
See: Creating Manual Bills.
Reverse an outstanding bill
See: Reversing Bills.
Reverse and rebill an outstanding bill
See: Reverse and Rebill.
When you enter a receipt for a loan payment bill, Receivables creates the following journal entry:
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.
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.
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:
Calculate the loan payoff amounts.
Notify borrower of total payoff amount.
When payment is received, select Process Payment to view the payoff transaction amounts and add receipts.
Submit the payoff request.
The expected payment date for a payoff must be:
after the loan origination date
within the term of the loan
between five days before and 365 days after current date
before or on the same date as the loan maturity date
after the last activity date, such as after the last billing date
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.
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.
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.
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.
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.
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.
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.
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:
Create a manual bill for an overpayment or additional principal payment.
See: Creating Manual Bills.
Create a credit for billing errors.
See: Reversing Bills.
Credit an outstanding bill and rebill with revised amounts for principal, interest, and fees.
See: Reverse and Rebill.
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.
You create a manual bill for principal.
The payment number for a manual bill defaults to the same payment number for last bill created.
You can view a manual bill in Outstanding Bills. Loans does not store completed manual bills in the Create Manual Bill window.
When payment is applied, Loans reduces the beginning balance for the next payment to be billed and recalculates the remaining principal amounts.
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:
Click Create Manual Bill
Click Add New Manual Bill.
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.
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:
Create a Manual Bill
To Add and Apply Receipts click Add Receipts Search for the Receipt Number.
Select the Receipt to apply to the outstanding invoice.
You can reverse an outstanding bill by crediting the bill. Loans reverses the loan principal, interest, and fee amounts for the bill by creating credits in Receivables, and recalculates amortization to reflect the change.
Additional Information: You can reverse only the most recent loan bill.
Use Reverse 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 four was incorrectly applied, and loan payment five was already billed. The receivables clerk then corrects the error for payment four. You must reverse and rebill payment five to recalculate the amounts due for principal and interest.
Select Reverse and Rebill for the outstanding bill that you want to rebill.
In the example above, you can reverse and rebill an outstanding bill only after the receivables clerk corrects payment four. If you want the amortization schedule to accurately reflect the principal and interest for the loan before payment four is corrected in Receivables, then simply credit payment five. You can submit the LNS: Billing program at a later time to rebill payment five.
See: Submitting the LNS: Reverse Last Bill Program.
Related Topics
Loan Term Extensions enables the user to extend the term (duration) of approved loans. The Term Extensions tab under the Servicing tab is enabled for loans that are in funding or servicing. It contains all term extension history for a loan, each with one of the following statuses. Click the Extension link to see the extension details.
Pending: Extension is pending for update, approval or rejection. This can be modified at any point of time.
Approved: Extension has been approved and loan maturity date has been moved according to the extension period. This cannot be modified.
Rejected: Extension has been rejected. This cannot be modified.
Additional Information: There can be only one pending loan term extension at any given time. You cannot add another extension until the current pending extension is approved or rejected.
To add a term extension, click the Add Extension button. Enter the extension details for the loan in the Term Extension Details page.
Important: The fields Index, Index Date, Index Rate, Spread, Interest Rate, and Interest Only are hidden from the Loan Extension Details page if the loan amortization schedule is customized.
Only standard amortization schedules are automatically extended upon term extension approval. For custom amortization schedules, you have to add new installments either by uploading new amortization schedules or by adding installments manually on the custom schedule page.
You can cancel approved or active loans using the Cancellation Requests tab under Servicing. The Cancellation Requests table lists all cancellation requests created for a given loan, and has one of the following statuses:
Pending: When the request is being reviewed. A loan can have only one pending cancellation request.
Rejected:When the request is rejected by the Loans Manager. A loan can have multiple rejected cancellation requests.
Approved:When the request is approved by the Loans Manager. If approved, the loan status becomes Cancelled and the system stops servicing the loan.
To create a new cancellation request fill out Description and Cancellation Date fields and click the Calculate Cancellation Amount button. The system calculates all due amounts based on Cancellation Date.
Additional Information: After a cancellation request is saved, the cancellation date is disabled. You can still update the actions and amounts.
Billed Unpaid Transactions Table: This table contains all billed unpaid invoices for the loan. You can choose the following actions for these invoices:
Adjust invoice down to zero
Credit invoice
Leave invoice to age in AR
Unbilled Transactions Table: This table contains all invoices that are still to be billed for the loan. You can choose the following actions for these invoices:
Bill and Adjust invoice down to zero
Bill and Credit invoice
Bill and Leave invoice to age in AR
Discard (do not bill) invoice at all. This option is available only for interest or fee invoices by setting Amount To Bill value to zero.
Original Receivables Table (ERS loans only): This table contains all original receivable invoices converted to the loan. By default for ERS loans, system calculates and breaks unbilled principal amount between original receivables and sets unbilled principal amount to zero. You can change unbilled principal distribution between adjusting original receivables and billing new principal invoice by changing the Amount to Return in the Original Receivables table.
Totals Table: This table contains all totals for the current cancellation request broken down by actions and invoices.
After the cancellation request is saved, you can approve it by clicking the Cancel Loan button. To reject the request, click the Reject Request button.
Additional Information: Only users with Loan Manager role can approve or reject cancellation requests.