8.2.48.2 Module Usage

Used for modeling Mortgage Offset Accounts (MOA's). If populated, the cash flow engine will reduce the loan's principal balance in calculating interest.

This applies to all Charge/Credit calculations that are available in TP - Instrument level charge/credit calculations for all TP Methods, Adjustments, and Option Costs. This Charge/Credit formula applies to all Processing types – Standard Term and Remaining Term.

The following example illustrates how Mortgage Offset Account work:

Table 8-15 Example of Mortgage Offset Account

Mortgage Offset Account Example Values
Current Balance 100,000
Rate of Interest (fixed) 10%
Interest Type Arrears
Amortization term (Days) 366
Accrual Basis 1
Compounding Basis 160
Payment frequency (Months) 3
Current payment 25,000
Maturity Date 12/31/2010
Last Payment Date 12/31/2009
Remaining number of payments 4
MOA Expected Balance 60,000
MOA Expected Balance Growth % 5.00%
Mortgage Offset Percentage 40%
Minimum Balance of MOA 3,000

As depicted in the earlier sample data record, the MOA Expected Balance is 60,000 at the last payment date (12/31/2009). The MOA Expected Balance is changed at each payment date by a growth percentage factor. This amount could be positive, negative, or zero. Each of the remaining payment dates would have an MOA expected balance of:

Table 8-16 Example of MOA Expected Balance

Date Value Calculation
3/31/2010 60,750.00 = 60,000 * (1+(.05/12))*3)
6/30/2010 61,509.38
9/30/2010 62,278.24
12/31/2010 63,056.72

Table 8-17 Derived Information

Accrual Basis(1 = 30/360) 0.08333333
Compounding per the payment frequency 3
Payment frequency (Days) 91 91 92 92 90
Payment Dates 3/31/2010 6/30/2010 9/30/2010 12/31/2010
Remaining number of payments 3 2 1 0
MOA Expected Balance on every Payment date 60,750.00 61,509.38 62,278.24 63,056.72

The amount of interest calculated is derived as follows:

Table 8-18 Interest Calculation

A) Interest Cashflow Calculation without Offset        
Payment Date 3/31/2010 6/30/2010 9/30/2010 12/31/2010
Opening Balance 100,000.00 76,908.31 53,226.86 28,940.66
Interest Rate per payment 0.025 0.025 0.025 0.025
Compounded Interest Rate 0.025 0.025 0.025 0.025
Interest cash flow 2,520.89 1,938.77 1,341.79 729.56
Actual Current payment amount 25,000.00 25,000.00 25,000.00 25,000.00
Principal Runoff 22,479.11 23,061.23 23,658.21 24,270.44
Ending Balance 77,520.89 53,847.09 29,568.65 4,670.22
MOA Prepay Runoff 612.58 620.23 627.99 635.84
Maturity Runoff - - - 4,670.22
B) Interest Cashflow Calculation with Offset
Payment Date 3/31/2010 6/30/2010 9/30/2010 12/31/2010
Remaining Balance after offset (only for Interest calculations) 75,700.00 52,304.56 28,315.56 3,717.97
Interest cash flow 1,908.31 1,318.54 713.8 93.73
New Financial Elements related to MOA
MOA Prepayment Runoff (FE 184) 612.58 620.23 627.99 635.84
Timing of MOA Prepayment Runoff (FE 185) -> MOA Prepayment Runoff * (Start date of the bucket - Payment date)/((Start date of the bucket - Payment date)+((Payment date+1)-End date of the bucket))

The Remaining Balance after Offset = Opening balance – (Expected balance on every payment date * Mortgage offset %)

For 3/31/2010, remaining balance for interest calculation = 100,000 – (60,750 * 40%) = 75,700.00

Interest Cash Flow considering the offset for the period is 75,700 * .025 = 1908.31