Navigation:  Loans > Loan Screens > Insurance Screen Group > Force Place Screen > Transaction Fields field group > FC Amort Methods

The FC Amort Method field displays the type of method used to amortize the finance charge. If institution option IHGL is set to "Y," the Cancel Other Insurance (tran code 2910-00), Force Place LPD Insurance (tran code 2870-71), and Cancel VSI Insurance (tran code 2890-00) transactions affect this new field by setting it to "2-Level Yield 2" when these transactions are processed. Otherwise, the field will default to blank (none).

 

Possible selections are as follows:

 

1 - Straight Line (original finance charge x remaining term / policy term)

2 - Level Yield 2

3 - Take All in First Month

 

---

Level 2 Calculation

 

The calculation for Level Yield 2 is only valid for precomputed interest loans (payment method 3). This calculation normally requires a monthly payment frequency (LNFREQ=1), but this amortization code can be modified to work with weekly, bi-weekly, and semi-monthly frequencies as well (contact GOLDPoint Systems for more information). This method will always amortize at monthend regardless of the selected frequency, but it will amortize the number of frequencies elapsed.

 

The steps are as follows:

 

1.The original amount of interest (LN78OI, F1FORG, INNORG, LNFORG, LNCORG, LNPORG, or LNDORG) is saved in the field "ORIG." This is used at the end of the calculations to determine what percentage of all the add-on interest belongs to the earned amount that is being calculated.

 

2.Figure the first of next month (NXTMON). The calculation will amortize to this date.

 

3.Get the original term of the loan (ORIGTERM). LNOTRM is used unless it is zero in which case LNTERM is used.

 

4.Calculate the extension interest (EXTINT).

 

EXTINT = LNOBAL – (ORIGTERM x LNOPIC)

 

5.Figure the first of the month after the date opened (FRSTMON). For example, if the date opened (LNOPND) was 12/17/2014; the program uses 01/01/2014.

 

6.Figure the end of the month of the date opened (OPNDME). If the date opened (LNOPND) was 12/17/2013; the program uses 12/31/2013.

 

Now we are ready to figure the first month of amortization (FRSTAMRT). This is the month of the date opened when LN78EI is "N" or EXTINT is equal to zero. If this is the case, FRSTAMRT = LNOPND (forced to the first of the month) and you can jump to step 12. Otherwise, continue to the next step.

 

7.Figure the number of days from the date opened (LNOPND) to (LN1DUE) using a 360 days base.

 

8.Subtract 30 from this number to get the extension interest days (EXTDAYS).

 

9.Add this result to the date opened (LNOPND) using a 365-days base to get the date opened plus extension days date (OPNEXT). This date is forced to the first of the month and becomes our possible first amortization date (FRSTAMRT).

 

10.Get the month of OPNEXT (DFMM) and the month of LN1DUE (DSMM). If the years of these dates are not the same, add 12 to DSMM, else continue.

 

11.Subtract DFMM from DSMM. If the answer is greater than 1, then FRSTAMRT = OPNEXT + 1 month, else FRSTAMRT = OPNEXT. FRSTAMRT is forced to the first of the month.

 

The date of first amortization cannot be greater than the date for which we are running (both are forced to the first of the month for this compare). Normally, the amortization selection program has decided this and it does not arrive at this point in the amortization process. If, however, an account slips by, it will be rejected and nothing is earned. Otherwise, we continue on with the process of preparing for the amortization.

 

12.Figure the partial month days for loans with extension interest (LN78EI = "Y" and EXTINT not equal to zero). If the loan does not have extension interest, then you can skip to the next step. Otherwise, it is figured by:

 

•Subtracting 30 days from LN1DUE using 365-days as the base.

•Figure the days between this date and the first of the month of the first due date (LN1DUE) using a 360-days base.

•This answer becomes the partial-month days (PARTDAYS).

•Skip to step 14.

 

13.Figure the partial-month days for loans without extension interest (LN78EI = "N" and EXTINT equal to zero). This is done by doing the following:

 

•Figure the number of days difference from the date opened (LNOPND) and the first of next month (FRSTMON) using 360-days as a base.

•This answer becomes the partial-month days (PARTDAYS).

 

14.Figure the remaining days (REMDAYS) by subtracting the partial days from 30.

REMDAYS = 30 – PARTDAYS

15.Calculate the P/I constant (PICN) to use in the amortization.

If LN78EI = Y then:

Figure the number of days from OPNDME to LN1DUE using 360 days as the base.

If this answer is greater than 30, add 1 to ORIGTERM to the term (OTERM) used in the P/I calculation.

If LN78EI = N then:

Use ORIGTERM as the term (OTERM) in the P/I calculation.

The P/I constant is equal to the amortizing balance (LN78AB) divided by the term.
PICN = LN78AB / OTERM

The original principal (LN78OP).

A payment frequency of 1.

The term in OTERM.

The P/I constant in PICN.

The approximate EXCEL equivalent of the formula is: JRATE = Rate(term,-LNOPIC,LN78OP) * 12

 

 

 
CUMUINT = (BALANCE * JRATE * PARTDAYS) / 360

 

20.For the rest of the calculation, we divide JRATE by 12 so this doesn’t have to be done each time through the loop. This is our nominal rate (RATE).
RATE = JRATE / 12

 

We now have all of the information we need to calculate the level yield for the loan. This calculation is done by making pseudo-payments on the loan. The program loops for the number of whole months (#MONTHS) and performs the following calculations:

 

21.The amount of payment interest (PMTINT) is calculated:
PMTINT = BALANCE x RATE

 

22.The amount of interest prior to the payment in the month is calculated:
PRIORINT = (BALANCE x RATE x REMDAYS) / 360

 

23.A new balance is the calculated:
BALANCE = BALANCE – (LNOPIC – PMTINT)

 

24.The amount of after payment interest (AFTERINT) is calculated on this new balance next:
AFTERINT = (BALANCE x JRATE4 x PARTDAYS) / 360

 

25.These interest amounts are added to the cumulative interest:
CUMUINT = CUMUINT + PRIORINT + AFTERINT

 

26.The program loops though these calculation for #MONTHS times.

 

When the looping is complete, CUMUINT has the amount of interest earned. The program then performs calculations to extract the earnings for the original amount (ORIG) as a percentage of all finance charges.

 

27.The percentage is calculated by:
PERCENT = ORIG / (LN78AB – LN78OP)

 

28.The earned amount (EARNED) is calculated by multiplying the cumulative interest by this percentage. This amount cannot be greater than the original amount.
EARNED = CUMUINT x PERCENT

 

29.The unearned amount is calculated by subtracting the earned amount from the original amount.
UNEARNED = ORIG – EARNED

 

30.This new unearned amount is subtracted from the unearned amount on file to figure the amount earned this month. This is done to keep the G/L in sync with the file.
(Earned_this_Month = LN78CG - UNEARNED) or
(Earned_this_Month = F1GREM – UNEARNED) etc.