8.2.89.2 Module Usage

Oracle ALM and Funds Transfer Pricing Cash Flow Methodologies reference NEG_AMRT_LIMIT when determining if the NEG_AMRT_AMT is exceeding its defined limits. This is relevant only for adjustable-rate accounts with AMRT_ TYPE_D = 600.

1. While calculating a payment event (the Payment Date), if the Cash Flow Engine calculates negative Principal Runoff, the CFE also checks the negative amortization limit (NEG_AMRT_LIMIT) to ensure that the current NEG_AMRT_ AMT is not exceeding its limit. NEG_AMRT_LIMIT is defined as a percentage of the original principal balance.

   For example, NEG_AMRT_LIMIT = 25 means that the Negative Amortization Amount should never exceed 25% of the original principal balance (principal balance should never exceed 125% of the original balance). The formula for this check is:

   (-1 * calculated (negative) principal runoff + negative amortization balance > NEG_AMRT_LIMIT/100 * ORG_PAR_BAL) If NEG_AMRT_AMT is exceeding this limit, the Cash Flow Engine recalculates the payment amount to fully amortize the instrument.

2. When deriving the recalculated payment amount after a NEG_AMRT_LIMIT has been reached, the cash flow engine also applies payment decrease/increase limits per period (PMT_DECR_CYCLE, PMT_INCR_CYCLE) and payment decrease/increase limits for the life of the record (PMT_DECR_LIFE, PMT_ INCR_LIFE). Because these fields limit how much the CUR_PAYMENT can be changed, the record may continue to negatively amortize even after a NEG_AMRT_LIMIT has been exceeded. If negative amortization does continue, the NEG_AMRT_AMT will continue to grow.