Loans > Loan Screens > Insurance Screen Group > Adjustments Screen > Processing transactions > Cancel VSI Insurance transaction (tran code 2890-00)

The Cancel VSI transaction (tran code 2890-00) is used to cancel VSI insurance policies.

See the Canceling insurance policies help page for step-by-step instructions on how to process this transaction.

•	When the transaction is run, the program places the transaction effective date in the Cancellation Date field on the Loans > Insurance > Policy Detail screen.

•	The transaction amount is placed in the Refund Amount field on the same screen.

•	The cancellation code (valid codes are 2-Flat Cancel and 4-Insured Request) is placed in the Cancellation Code field on the same screen.

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The principal balance is reduced by the transaction amount, and the P/I Constant is restored to the Original PI Constant (found on the Loans > Account Information > Additional Loan Fields screen), unless this was a force-placed insurance policy; the policy was canceled using Cancel Code 4; and institution option RCPI is on. In that case, the P/I Constant is recalculated as of the cancellation date. See Option to Recalculate P/I Constant for Force-Placed Insurance Cancellations below.

•	You must have an insurance record with an insurance type 90 (VSI Insurance) established before this transaction will work.

This transaction triggers the Commission Adjustment transaction (tran code 461) to adjust the remaining commissions. See the Commission Adjustment transaction information for more information on this transaction.

This transaction also triggers a 100 transaction to clear remaining unearned insurance commissions and adjust the General Ledger accordingly.

As the transaction is reversed and reposted, it is displayed in history as of the original transaction date. However, the actual date it was posted appears in the description section of the history.

Payments are backed out and reapplied to the effective date, if the policy is "flat cancelled” (Cancel Code 2).

If any late charges were assessed when the insurance policy was on the loan, and the insurance policy is later flat canceled, late charges will be backed off the account and reassessed using the original P/I Constant for the calculation of the late charges (if your institution uses a Late Code that is a calculation).

If Institution Option OP15 AFCB is enabled, the finance charge will only be refunded when a flat cancel (Cancel Code 2) is issued.

The history description for this transaction is “Cancel VSI Insrn.”

An institution option, RCPI (ReCalculate P & I after insurance cancellation), is available that will re-compute the P/I Constant needed after a force-placed insurance cancellation (except for flat cancels) to pay a loan off by the maturity date. If RCPI is set up, the transaction will determine the appropriate P/I Constant to pay the loan off by maturity and the P/I Constant will be updated accordingly. (In other words, the P/I Constant will be recalculated using the Principal Balance at the time of the cancellation and remaining payment term.)

This option does not affect flat cancellations (Cancellation Code 2) of insurance (as if the insurance never existed). In that case, the P/I Constant (and the Next P/I Constant table) always reverts to its state as of the time before the insurance was force placed.

Note: If you do set this option, for some customers their P/I Constant may go down but for others, their P/I Constant may go up. You may need to test this on your beta machines by running some insurance cancellations with the option on and off to understand the results before committing to turn on this institution option.

Scenario:

An interest-bearing loan (payment method 6) had an original loan balance of $5,000 for three years and now has $1,988.67 remaining with 12 months left on the loan. The P/I Constant is $183.28. (Interest Rate = 18.99 and Interest Calculation Method = 102 (360/360)). That month, a force-placed insurance policy is placed on the loan with a 12-month term and premium amount of $1,000 (assuming no finance charges). This changes the P/I Constant to $266.61.

After two months of $300 payments ($600 total), the insurance policy is canceled because the borrower found their own insurance and no longer needs force-placed insurance. The term left on the loan is now 10 months with Principal Balance now at $1,447.39. When the system recalculates the P/I Constant (because RCPI is set to “Y”), the P/I Constant is now $157.64 for the remaining term of the loan.