HORIZON Lending Update

Transcription

1 HORIZON Lending Update What s New with Loans Paul Stokes, HORIZON Product Line Manager May 2017

2 What s New with Loans Agenda Items Credit Bureau Updates MLA Updates Call Report Changes Fannie Mae and Freddie Mac Updates ULI CFPB Updates Extension Fees Loan Product File Changes Enhanced Risk Controls Future Projects 1098 Updates 2

3 Credit Bureau Updates 3

4 Credit Bureau Updates When does the CDIA publish their annual updates? Typically mid to late 3rd quarter, however. This year it was published in April What are the changes? Coming Updates: Adjustment to how Master Loan and Tranches are reported: Currently, high balance and payment due date reflect the Master Loan This update will ensure we reflect the total relationship New values added to the Master Loan Relationship Summary screen In addition, adding top/bottom ability when viewing active and closed Tranches 4

5 Credit Bureau Updates Special Comment Codes: Codes M, CI and CJ Date Closed should be reported to identify the date the account was closed to further purchases/use. Code CL Definition clarified stating that suspended means credit line is temporarily unavailable for use. Codes AP and CL Date Closed should not be reported since credit line is temporarily suspended. Expect to release update in GIB and IRB soon. 5

6 Credit Bureau Updates Values are initiated when this update is loaded. You ll have the ability to maintain the LTD high balance. These are existing unused fields within the Master Line relationship file. 6

7 Credit Bureau Updates When do your credit bureau files get updated? Loans Monthly? Daily? Mortgage Monthly? Daily? Loans, you have a BCR option; Mortgage you do not have an option however. Coming to you this summer in an IRB you will have a BCR option in Mortgage as well 7

8 Credit Bureau Updates Daily is the preferred option, especially for loans not due on the 1 st, to ensure proper updating when a threshold is past. 8

9 Military Lending Act (MLA) 9

10 Military Lending Act (MLA) On July 22, 2015, the Department of Defense ( Department ) amended its regulation that implements the Military Lending Act ( MLA ). In general, these amendments extend the protections afforded by the MLA to a wider range of credit products by expanding the definition of consumer credit to be consistent with that found in the Truth in Lending Act ( TILA ). What s the key? Calculation of the MAPR The MLA generally prohibits creditor from charging a covered borrower a MAPR that is greater than 36 percent. The framework for MAPR computation is comprised of the traditional measure of APR found in Regulation Z but also includes finance charges and fees, including credit insurance premiums, application fees, participation fees, and fees for ancillary add-on products. For example, the MAPR would include the fees and/or premiums related to: Credit insurance, Single premium credit insurance, Debt cancellation, and Debt suspension For open-end credit accounts, these fees must be included in the MAPR even if the fees are to be collected after the account is opened. 10

11 Military Lending Act (MLA) The HORIZON Timeline: 4th Quarter 2016: Support for System Type 5 accounts Identify accounts on PCM screen Updates to the Fee Prototype BCR to identify the fees Creation of the reports necessary to report MLA accounts and the MAPR calculations Updates to statement processing Payoff inquiry updates 1st Quarter 2017 Support for System Type 1 4 accounts Identify accounts on Misc Data/User Defined screen Reports generated with MAPR calculations 2017 Release Middleware update to support population during new account setup 11

12 Military Lending Act (MLA) 12

13 Military Lending Act (MLA) 13

14 Military Lending Act (MLA) 14

15 Call Report Changes 15

16 Call Report Changes GIB published February : On August 17, 2016, the FFIEC published FIL : Proposed New Consolidated Reports of Condition and Income for Small Institutions (Call Report 51 - Effective March 2017). The FFIEC 051 is a streamlined version of the existing FFIEC 041 Call Report that, at present, is filed by all institutions with domestic offices only. The introduction of the new FFIEC 051 report is part of the FFIEC s community bank Call Report burden-reduction initiative, and is intended to ease reporting requirements and lessen reporting burden for eligible small institutions. The FFIEC 051 was created from the FFIEC 041 by removing certain existing schedules and data items that have been replaced by a limited number of data items collected in a new supplemental schedule, eliminating certain other existing data items, and reducing the reporting frequency of certain data items. To assist you in understanding the differences between the new FFIEC 051 and the existing FFIEC 041 Call Report, a redlined copy of the FFIEC 041 report form showing the schedules and data items being removed or collected less frequently than quarterly, as well as a prototype copy of the FFIEC 051 report form, are available on the FFIEC s website ( Draft instructions for the FFIEC 051 report form, including its supplemental schedule, are also available on that web site. In addition, drafts of the Call Report schedules in the FFIEC 041 and FFIEC 031 report forms reflecting the burden-reducing changes are available on the FFIEC s website. 16

17 Call Report Changes HORIZON will be implementing the deletion of the identified line items and creation of the currently supported lending call report schedules in a project that cannot be released prior to the March 31, 2017 effective date. Implementation is expected in Clients using the existing RG* call report schedules RC-C, RC-L and RC-N can use the existing HORIZON generated schedules to complete the corresponding FFIEC forms. We will announce soon the retirement of the old call report schedules LN3400* and MLN740*. 17

18 Fannie Mae and Freddie Mac Updates 18

19 Fannie Mae and Freddie Mac Updates Fannie Mae and FHLB Xtra program changes announced in 2014, implemented February From announcement to final implementation we issued five GIB s, multiple IRB s, two WebEx sessions detailing the changes, announcements at multiple InfoShare conferences and Regional meetings. Why do I mention this? Three clients did not initiate the changes on a timely basis: They did not attend InfoShare, Regional or on line meetings. They did not read GIB or IRB documentation. In panic they call Support once notified by Fannie Mae they missed their reporting deadlines. We could not programmatically help them but did support them through manual reporting processes. Currently all clients are reporting successfully (keeping fingers crossed!). 19

20 Fannie Mae and Freddie Mac Updates So now it is Freddie Mac s turn! August they announced their processes were changing to more align with the other agencies. These changes will be more intensive than the other agencies: Moving from a 15th cutoff to an end of the month cutoff. Form 59 changes. Different scenarios for remittance/drafting to Freddie Mac based on timing of payments. Initially scheduled to go live October 2018; in February 2017 they announced a delay until May We have monthly meetings ongoing with Freddie Mac representatives. We have started periodic client meetings via WebEx; are you participating? 20

21 Universal Loan Identifier (ULI) 21

22 Universal Loan Identifier (ULI) HMDA initiative to capture a universal loan identifier that stays with a loan through its life from origination through payoff, potentially across multiple organizations. (NOTE: HORIZON does not support HMDA processes). The value can be up to 45 alpha/numeric digits: Begins with an institution s Legal Entity Identifier Then up to 23 additional characters, that can be letters or numerals; has to be unique within an organization; cannot directly identify the applicant or borrower Ends with a 2 character check digit calculated using the ISO/IEC 7064, MOD as published by the International Organization for Standardization. A check digit generator is available at Capture of the ULI must commence by January What are we going to do? 22

23 Universal Loan Identifier (ULI) HORIZON will support the input of the ULI in both the loan and mortgage applications: Since the field is 45 characters using a user defined field will not work. We will initiate a new file to capture this value; HORIZON will not create the value, it will be up to our clients to input this value. Changes will be made to the LN Misc Processing screen and the ML Underwriting screen. There will be no validation of the data entered. Maintenance logging will be supported, the value will show on a full record display. The initial project will ship in a 2017 IRB prior to year end. This IRB will not support new account processes. Changes to the HORIZON middleware and mortgage staging files will be made in the 2018 release to support new account setup processes. 23

24 1098 Updates 24

25 1098 Updates 2016 Major Updates to the 1098 form PMI reporting > $ Balance reporting as of the beginning of the year Mortgage Origination Date Property Address inclusion Two projects last year, one updating collateral to identify which collateral record to use for 1098 purposes and one for the form changes 2017 Updates: Number of Properties A new collateral relationship field will be added to represent number of properties 25

26 1098 Updates A new option, number of properties, will be added to the right of the 1098 address flag. You will only need to populate this if the collateral record/loan relationship represents > 1 property. 26

27 CFPB Updates 27

28 CFPB Updates First, here we go again. Notified August 2016 of changes to be implemented either 12 or 18 months after final publication. Published October in the Federal Register. Changes: Successors in Interest - Early Intervention Definition of Delinquency - Loss Mitigation Requests for Information - Prompt Payment Crediting Force-Placed Insurance - Periodic Statements 28

29 CFPB Updates Successors in Interest In an attempt to correct the challenges faced by successors in interest, the final rule has changed three sets of rules relating to successors in interest. First, the CFPB is adopting definitions of successors in interest for purposes of Regulation X and Regulation Z that are modeled from the categories of transfers protected under 341(d) of the Garn-St Germain Act. Second, the CFPB had finalized rules relating to how a mortgage servicer confirms a successor in interest s identity and ownership interests. Third, the CFPB is applying the Regulation X and Regulation Z mortgage servicing rules to successors in interest once a servicer confirms the successor in interest s status. No changes expected within HORIZON. 29

30 CFPB Updates Definition of Delinquency Currently, Regulation X, contains various definitions used throughout the provisions of subpart C of Regulation X, but there is not a generally-applicable definition for the term delinquency. To ensure that the term delinquency is used consistently throughout Regulation X s mortgage servicing rules, the CFPB has adopted the definition of delinquency found in with changes from the proposal. A borrower and a borrower s mortgage loan obligation are delinquent beginning on the date a periodic payment sufficient to cover principal, interest, and, if applicable, escrow, becomes due and unpaid, until such time as no periodic payment is due and unpaid. This definition is not intended to affect the industry s existing policies and procedures or existing requirements for identifying and working with borrowers who are late or behind on their payments, or existing requirements imposed by other laws or regulations, such as the Fair Credit Reporting Act and Regulation V. No changes expected within HORIZON. 30

31 CFPB Updates Requests for Information The final rule now clarifies in Comment 36(a)-2.ii.A where Fannie Mae or Freddie Mac is not the owner or trustee of the securitization trust in which the loan is held, a servicer must respond to even a nonspecific request for the identity of the owner or assignee by providing information about the trust and contact information for the trustee. Comment 36(a)- 2.ii.B further clarifies that fi the request for information did not expressly request the name or number of the trust or pool and Fannie Mae or Freddie Mac is the owner of the loan or the trustee of the securitization trust in which the loan is held, the servicer complies with (d) by responding to a borrower s request for information by providing the name and contact information for Fannie Mae or Freddie Mac, as applicable, without also providing the name of the trust. Additionally, in an attempt to address potential privacy concerns under Regulation P and the Gramm-Leach-Bliley Act, the final rule adds (e)(5) and (d)(3) to Regulation X. A servicer responding to request for information or a notice of error request for documentation may omit location and contact information, as well as personal financial information (other than information about terms, status, and payment history of the mortgage loan) if: (1) the information pertains to a potential or confirmed successor in interest who is not the requester; or (2) the requester is a confirmed successor in interest and the information pertains to any borrower who is not the requester. No changes expected in HORIZON. 31

32 CFPB Updates Force-Placed Insurance The current force-place insurance requirements found in Regulation X, (b) provide that a servicer may not charge a borrower for force-placed insurance unless the servicer has a reasonable basis to believe that the borrower has failed to comply with the mortgage loan s contracts requirement to maintain hazard insurance. Subsection (c)(1) requires the servicer to provide a borrower an initial notice and a reminder notice before assessing a fee or charge related to force-placed insurance. Concern that the current rule relating to force-placed insurance did not afford servicers flexibility to address circumstances in which a borrower has insufficient coverage, the CFPB has amended subsection (c)(2)(v) to provide that force-place insurance notices must include a statement that the borrower s hazard insurance is expiring, has expired, or provides insufficient coverage, as applicable, and that the servicer does not have evidence that the borrower has hazard insurance coverage past the expiration date or evidence that the borrower has hazard insurance that provides sufficient coverage. Four Model clauses have been provided in amended appendix MS-3 to Regulation X. No changes planned in HORIZON as we do not support generation of the force-placed notices today. 32

33 CFPB Updates Early Intervention The final rule clarifies the requirement for live contact with a delinquent borrower not later than the 36th day of delinquency. Additional clarification is provided related to the 45 day written notice, clarifying that the notice is required once within a 180 day period. Another notice is required if the borrower is again 45 days delinquent after the 180 day period. Clarifications are given in the final rule related to contact with borrowers in bankruptcy. Additionally, the servicer is also exempt from the live contact requirements of (a) if any borrower on the mortgage loan invokes the FDCPA s cease communications protections afforded under FDCPA s Section 805(c). Model clauses have been provided in amended MS-4(D) in appendix MS-4 to Regulation X. No changes within HORIZON are expected. 33

34 CFPB Updates Loss Mitigation The final rule clarifies the loss mitigation requirements as they relate to duplicative requests. Under the final rule, a borrower can elect a short-term repayment plan for the repayment of no more than 3 months of past due payments over a period lasting no more than 6 months. Additionally, within 5 business days of offering a short-term repayment plan option based on an incomplete loss mitigation application, the servicer must provide a notice stating, among other things, the specific payment terms and the duration of the repayment program. Notice of a complete application is not currently required in the loss mitigation requirements, unless it is part of the acknowledgement letter, so the final rule now requires that within 5 business days of a complete application, a servicer must provide a written notice to the borrower with requisite information. The final rule generally prohibits a servicer from denying a complete application solely because the servicer lacks 3rd party documentation. Within the 30-day evaluation period, or shortly thereafter, the servicer must send a notice with the requisite content. Upon receipt of the missing 3rd party documents, the servicer must promptly evaluate the application and provide its evaluation notice. 34

35 CFPB Updates Loss Mitigation Cont. The amended final rule has provided clarity to the determination of a reasonable date. Generally, 30 days would be considered reasonable, but should one of the milestones be within the 30-day period, the servicer should select the next milestone date. In no situation should the date ever be less than 7 days. The amended final rule adds that if a transferee servicer acquires servicing rights to a mortgage loan for which a loss mitigation application is pending as of the transfer date, the transferee servicer must comply with the loss mitigation requirements within the timeframes that were applicable to the transferor servicer based upon the date the transferor servicer received the loss mitigation application. The final rule provides clarity to the information guidance suggesting that a servicer can generally deny loss mitigation option based upon a borrower s preference and, in turn, not collect documents relating to option(s) in which the borrower has not expressed interest. The final rule now provides that a servicer may not stop collecting documents/information for any loss mitigation option based solely on a borrower s stated preference. No changes expected within HORIZON 35

36 CFPB Updates Prompt Payment Crediting The final rule now memorializes that Regulation Z, (c)(1) refers directly to a closed-end consumer credit transaction secured by a consumer s principal dwelling. If a loan contract has not been permanently modified, but the consumer has agreed to a temporary loss mitigation program, Comment 36(c)(1)(i)-4 mentions that a periodic payment is the amount sufficient to cover principal, interest, and escrow (if applicable) for a given billing cycle under the loan contract, regardless of the payment due under the temporary loss mitigation program. A temporary loss mitigation program does not remove the obligations of the existing loan contract, and thus, a servicer should generally treat a payment due under a temporary loss mitigation program as a partial payment. Comment 36(c)(1)(i)-5 mentions that if the loan contract has been permanently modified, a periodic payment is the amount sufficient to cover principal, interest, and escrow (if applicable) for a given billing cycle under the modified loan contract (c)(1): No servicer shall fail to credit a periodic payment to the consumer s loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency. Do you know how a periodic payment is defined? No changes expected within HORIZON. 36

37 CFPB Updates Charge Off Accounts: The current regulations do not provide an exception to periodic statements for a loan that has been charged off. However, the final rule now provides an exemption to servicers from the requirements set forth in for a mortgage loan, so long as two conditions are met: The servicer must have charged off the loan in accordance with loan-loss provisions and will not charge any additional fees or interest on the account; and The servicer must provide, within 30 days of charge off or the most recent periodic statement, a periodic statement, clearly and conspicuously labeled Suspension of Statements & Notice of Charge Off Retain This Copy for Your Records, as well as provide other applicable statements. Small Servicer: The final rule now excludes from the small servicer determination both mortgage loans voluntarily serviced for a nonaffiliate that is not a creditor or assignee and also transactions serviced for a seller financer that meet all of the criteria identified in the definition of a seller financer in (a)(5). The CFPB also deems it appropriate to exclude from the small servicer determination all loans that meet the criteria set forth in (e)(4)(iii)(A) and (D), regardless of whether the small servicer began servicing the loan before the effective date of the final rule. 37

38 CFPB Updates Periodic Statements Content and Layout: Regulation Z, (d) currently specifies the disclosures that must be provided on the periodic statement and requires that several of these disclosures be in close proximity to each other. The revised comments to this section of the regulation indicate that items required to be in close proximity may not have any unrelated text between them. The final comment 41(d)(1)-1 of Regulation Z provides that, if a balance of a mortgage loan has been accelerated, but the servicer will accept a lesser amount to reinstate the loan, the Amount Due under (d)(1) must identify only the lesser amount that will be accepted to reinstate the loan. The Explanation of Amount Due under (d)(2) should omit the monthly payment amount that would generally be required under (d)(2)(i) and now include both the reinstatement amount and the accelerated amount. the periodic statement should include an explanation indicating that the reinstatement amount will be accepted to reinstate the loan. This statement must be on the front page of the periodic statement, or alternatively, may be included on a separate page enclosed with the statement or in a separate letter. Additionally, Comment 41(d)(1)-2 explains that the periodic statement must include language stating that the reinstatement amount will be accepted to reinstate the loan through the as of [date] or good through [date], as applicable. Special Instructions (specific mailing address, cashiers check remittance) must be on the periodic statement. 38

39 CFPB Updates Periodic Statements Cont. If the consumer has agreed to a temporary loss mitigation program, the Amount Due under (d)(1) may identify either the payment due under the temporary loss mitigation program or the amount due according to the loan contract. The Explanation of Amount Due under (d)(2) must, rather than should, include both the amount due according to the loan contract and the payment under the temporary loss mitigation program. A statement should also be included that must explain that the amount due is being disclosed as a different amount because of the temporary loss mitigation program. This statement must be on the front page of the periodic statement, or alternatively, may be included on a separate page enclosed with the statement or in a separate letter. Comment 41(d)(1)-3 now provides that if the loan contract has been permanently modified, the Amount Due under (d)(1) must identify only the amount due under the modified loan contract. The final rule clarifies that the length of a consumer s delinquency is measured as of the date of the periodic statement or the date of the written notice provided under (e)(3)(iv). A consumer s delinquency beings on the date in which an amount sufficient to cover principal, interest, and escrow (if applicable) becomes due and unpaid, even if the consumer is afforded a period after the due date to pay before the servicer assess a late fee. 39

40 CFPB Updates Periodic Statements Cont. Currently, Regulation Z, (e)(5) provides that a servicer is exempt from the requirement to send a periodic statement for a mortgage loan while the consumer is a debtor in bankruptcy. The final rule and associated commentary now limit the circumstances in which a servicer is exempt from the periodic statement requirements with respect to a consumer who is a debtor in bankruptcy or has discharged personal liability for a mortgage loan through bankruptcy. Section (e)(5)(i) provides that a servicer is exempt from the requirements of with regard to a mortgage loan based on certain tests being met; please refer to the rule. Periodic statements will also take into account the unique circumstances of bankruptcy and accurately reflect the payments made by consumers in bankruptcy. Specifically, certain modifications to periodic statements will be made for consumers who have filed under Chapter 12 or Chapter 13. Section (f)(1) through (5) set forth the various requirements for such modified periodic statements. New sample forms are provided in Regulation Z s appendices H- 30(E) and H-30(F). HORIZON will be supporting the new statement requirements. 40

41 CFPB Updates 41

42 CFPB Updates Periodic Statements What are we doing? A date will be added to the Mortgage Statement BCR option to determine when the statements take affect: the date will be initiated to April but can be changed to an earlier date. Banks will use existing values within LN and ML to determine the bankruptcy chapter: LN uses an actual bankruptcy chapter field and ML uses Special Function codes, both in conjunction with the borrower information data. A new value will be added at the loan level to allow a bank to determine if the account is subject to the bankruptcy statement; the chapter will determine the statement to be generated. Statement messages will be hardcoded based on the chapter. The bankruptcy file within ML will be opened up to the LN application, with modifications. ML has special trancodes that update the values in the bankruptcy file; that will not change. LN does not have special bankruptcy trancodes and that will not change. A flag will be added for OTE entry only to specify a transaction is related to pre-petition payments from the trustee, for both LN and ML. These will update the bankruptcy data. Maintenance will be allowed as it is today in case you forget to set the flag/use the correct trancodes. 42

43 CFPB Updates Periodic Statements What are we doing? Values for the Chapter 12/13 periodic statements will be a mix of fields on the bankruptcy screen and reading history for the periodic statement period. AFP Statement formats: will not be supported for bankruptcy statements. NOTE: IBM is eliminating development tools related to AFP print. Alternate delivery, as it exists today for periodic statements, will be supported for the bankruptcy statements. Bankruptcy statements will have their own unique spool files and report identifiers. Certain loan unique statement messages will most likely be supported. Coupon books related to loans in Bankruptcy will not be supported. Let s look at a few screens. 43

44 CFPB Updates Update the screen to include values appropriate for credit bureau reporting. Add additional pre-petition values as needed. Potentially add links to loan level messages. 44

45 CFPB Updates The new effective date will be added to this screen, defaulted to April

46 CFPB Updates Potentially add other bank defined messages here related to Bankruptcy. 46

47 2017 Projects 47

48 Extension Fees 48

49 Extension Fees Extension Fees: Currently Extension Fees (Type 026) are not included in the list of fees available to add to an existing loan in LN Master/Earnings Records Maintenance. An Extension Fee Earnings Record is automatically created when an Extension is posted using the LN Master/Extension option if a Fee 26 record is not already in place. In this project Extension Fee 26 has been added to the list of fees available to add in LN Master/Earnings Records Maintenance for existing System Type 1 through 4 loans only (extensions cannot be posted on System Type 5 loans). Extension Fees may currently be selected in Product Type Maintenance and if clients wish to add Extension Fees to new loans it must be added as a defaulted fee in the associated Product Type record. A manually posted TC 29 Extension Fee Payment currently does not update the fee balance and date paid values on the extension fee record. This will change with this update. Keep in mind, manually posted extension fees will not cause the loan to appear on the Extension/Renewal/Adjustment report; only using the extension option accomplishes this. 49

50 Loan Product File Changes 50

51 Loan Product File Changes Product File Changes Currently values for Pay in Advance Frequency and Increment, and Bill option are not available as product defaults. What happens today? System Type 1 Loans: Pay Split 1 and 2: P/99 (Project up to 99 payments). Pay Split 3: E/00 (Excess Payments to Principal). Pay in Advance processing does not apply to Pay Split 3 (Scheduled Balance) loans. This is not changing. System Types 2 through 4: E/00 (Excess Payments to Principal). System Type 5: Although Pay in Advance processing is not applicable to System Type 5 loans because they do not include a Payment Schedule, the Pay in Advance settings for this loan type are defaulted to E/00. This will not be changed. 51

52 Loan Product File Changes 52

53 Loan Product File Changes The new values are available in the HORIZON Middleware. 53

54 Risk Controls 54

55 Risk Controls Risk Ratings Currently within the loan and mortgage applications you have the ability to identify one risk rating per loan: Values are identified in the central lookup file Ability on LN to add a value during new loan setup; ML does not have that ability No segmentation based on collateral values or other factors With this update: Up to 9 risk values can be assigned to a loan. The existing Central Lookup values will be utilized for our expanded usage of risk codes. Each value will have a corresponding Classified Balance assigned that must total the Loan Amount. System calculated values for Allocated Balance and Classified Available Balance will be stored in our new risk file; this file is shared amongst LN and ML. 55

56 Risk Controls With this Update: New account setup will accommodate the initial risk code value in LN as it does today. ML will update new account setup, and the staging file, to accommodate an initial risk code value. Additional values can be added to a new Lending Risk screen shared by both applications. A sequencing methodology will be used as you assign risk and the appropriate classified balance for each code. Changes/Additions will result in an intraday recalculation of allocated and classified available balances; this also occurs in the BOSS run. There will be a new flag, Interagency reporting Flag, that will be used as the indicator identifying which risk value will be reported in the ALERT file. Master Loan/Tranches: The newly expanded Risk rating functionality will only apply at the Master Loan level, as this represents the combined view of the Master Loan/Tranche relationship. Classified Balance allocations will be based on the Total Loan Amount of the Master Loan Record, as it represents the combined relationship balance. Allocated Balances will be distributed accordingly in the tiers using the Total Relationship Current Principal Balance (LRCBAL) from the Loans: Master Loan Summary (LNMLSF) file. Tranche loans will not contain a Lending Risk record in the SIRISK file and no Lending Risk Classification will be found in the Options Menu. Risk values will not be assigned on participation records. 56

57 Risk Controls 57

58 Risk Controls With this Update: Various items can impact a loans Available balance at any given time throughout the processing day. To accommodate intraday changes to availability, a Re-Calc / Re-Sequence option has been added to the Lending Risk screen. When this option is taken, the Allocated Balance(s) will be automatically re-distributed among the tiers and the Classified Available balance(s) will be immediately recalculated. This is essentially the same program that runs nightly in BOSS, but this option gives the user more flexibility to see immediate updates as needed. Available balances can be impacted by any of the following items: Asset Based Lending Memo Posts Overlimit Bank Holds Impaired Status Updates Debit Trans Holds Expired Lines of Credit Past Due / Administrative Freeze 58

59 Risk Controls 59

60 Risk Controls With this Update: The new Lending Risk Classification screen displays commonly used information and links to a user for determining the risk grade. The screen features short name, loan status, balance information, past due information and special notations for items such as Non-Accrual / Collection indicators as well as links to the loan Title, Collateral and Master Loan Summary. Users will then have the capability to add or maintain the Risk codes, by assigning a range of Classified Balances to the account. This effectively assigns balance limitations to each Risk Code. The program will then dynamically begin assigning the loan s Current Principal Balance (thereby Allocating the Balance) to each tier in an amount up to, but not to exceed) the Classified Balance. The program will then calculate the Classified Available Balance by subtracting the Allocated Balance from the Classified Current Balance. Allocated Balances will be applied in a Lowest Sequence to Highest Sequence fashion as balances are drawn, and then conversely, from a Highest Sequence to Lowest Sequence fashion on the repayment. Classified Available Balances will update in a Highest to Lowest Sequence fashion as balances are drawn and, conversely, from a Lowest Sequence to Highest Sequence fashion on the repayment for System Type 3 or 5 loans. System Type 1 & 2 loans will reflect Zero availability once all balances have been drawn. Negative available balances will always be noted as Zero Availability as they do not apply to Lending Risk methodology. Users will never see negative amounts in the Classified Available Balance fields. 60

61 Risk Controls Special Considerations: Other file updates: As previously mentioned, the ALERT file generated within HORIZON will include the risk value associated with the Interagency Reporting Flag value on the chosen risk code. In addition, the HORIZON call report extract likewise will utilize that same value. The FIS LLA extract has been expanded to include all risk codes and the associated values. Automated Risk Control Assessment: this process will continue to update one risk value and it will be the value associated with the Interagency Reporting Flag. Purge processes are updated to ensure data is purged when a loan is purged. Full record displays are updated to show the risk codes and associated values. Maintenance to the loan amount value will prompt the user to update risk controls for that loan when more than one risk value exists on a loan. 61

62 Future Products 62

63 Future Projects Dealer Number Expansion Swap Processes Multiple Variable Rates in Loans CRA Tracking and Reporting 63

64 Paul Stokes,