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