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The following amortization methods are currently available through GOLDPoint Systems. Click a description in the table below to jump to a detailed explanation of that amortization method.

 

 

Definitions of Amortization Methods

 

The following table is helpful in defining some of the terms used in the Amortization Method descriptions below.

 

 

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0 - Rule of 78s Method

 

The rule of 78s method (code 2) calculates the amount by taking the difference between the Date Opened to the date the item was last amortized, and the amount figured from the Date Opened to the current date. If the loan has an action code 78 and date (Deferred Fees Start Date as set up on the Actions, Holds and Event Letters screen), it calculates by taking the difference between the Date Last Amortized and the action code date.

 

The formula for each of these amounts is displayed in the table below. "RINO" is the remaining installments in months (Date Opened to the Date Last Amortized, unless the loan has action code 78, in which case it is the difference between the Date Last Amortized and the Action Code Date for action code 78). "OINO" is the original installments (Date Opened to the current date).

 

 

Example 1:

 

A loan was opened in July 2010 with original deferred fees of $100. It was last amortized on June 2011. Today's date is July 1, 2011. This amortization method would be calculated as follows:

 

[11 X (11 + 1)] % [12 X (12 + 1)] X $100 = $84.62

 

Example 2:

 

A loan was opened in July 2010, but wasn't set to start deferring fees of $100 until October 2010 (action code 78 date). The date the loan was last amortized was June 2011, and today's date is July 1, 2011. This amortization method would be calculated as follows:

 

The difference between action code 78 date and the last amortization date is 9 months (RINO).

 

[9 X (9 + 1)] % [12 X (12 + 1)] X $100 = $57.69

 

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1 - Straight Line Method

 

The straight line method (code 0) is the default. It is most often used for loans with no scheduled payment terms (demand loans) and revolving lines-of-credit. It is calculated as follows:

 

 

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2 - Level Yield Method

 

This amortization method is best defined by the following example.

 

 

The system calculation (FPSLNVAL) takes into account Rebate Rule Days (LN78DR) = 15 and the date opened after the 15th of the month. These loans will earn zero the first month for fee/cost amortization.

 

 

* Elapsed months =

(YEAR(NXTMON)-YEAR(LNOPND))*12+MONTH(NXTMON)-MONTH(LNOPND)

 

Based on above information, Amortizing Fees are calculated as follows using method 2:

 

Original Fee (F1FORG) = $52.00

Remaining Fee (F1FREM) = $52.00

Adjusted Rate (ADJRTF1) = 7.74467%

Earned = 1.95

Unearned = 50.05

Earned this Month = 1.95

 

Note: 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.

 

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5 - Straight Line 2 Method

 

 

This calculation is similar to the regular Straight Line Method 1, except in the way the terms are calculated. The calculation steps are as follows:

 

The original term (OTERM) is taken from the original loan term (LNTRMO) if it is populated, otherwise the current loan term (LNTERM) is used.

 

The Elapsed term is calculated using a formula that does not take into account whether a full month has transpired. This is how this method is different from method 1 that only uses full months. The formula for this method is:

 

Elapsed Term = To date (Century) - From date (Century) x 100 + To date (Year) - From date (Year) x 12 + To date (Month) – From date (Month)

 

Example:

From date = 02/28/2005        To date = 03/15/2010

 

2000 – 2000 x 100 + 10 – 05 x 12 + 03 – 02 = 61 months

 

This is not allowed to be more than the original term.

 

The remaining term (RTERM) is calculated using the formula:

 

RTERM = OTERM – ETERM

 

A per diem amount is calculated using:

 

Per diem = Original amount (F1FORG) / OTERM

 

The new Remaining amount that will replace the G/L Remaining amount (F1GREM) is calculated by:

 

Remaining = Per diem X RTERM

 

The amount that is earned this month is the difference in this Remaining amount and what is on the file in the G/L Remaining (F1GREM) amount.

 

Earned this month = F1GREM - Remaining

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6 - Straight Line 3 Method

 

This calculation is valid for any loan but was designed to amortize extension interest for precomputed interest loans (payment method 3). It covers a term from the date opened to the first due date minus 1 month. The calculation steps are as follows:

 

The original term (OTERM) is the days difference from the date the loan was opened (LNOPND) to its first due date minus one month (LN1DUE - 1).

 

The elapsed term (ETERM) is the days difference from the date the loan was opened (LNOPND) to the run date of the amortization. This is not allowed to be more than the original term.

 

The remaining term (RTERM) is calculated using the formula:

 

RTERM = OTERM – ETERM

 

A per diem amount is calculated using:

 

Per diem = F1FORG / OTERM

 

The new unearned or remaining amount that will replace F1GREM is calculated by:

 

Remaining = Per diem X RTERM

 

The amount that is earned this month is the difference in this unearned amount and what is on the file in F1GREM.

 

Earned this month = F1GREM - Remaining

 

Please note that the entire Original amount (F1FORG) is earned at the end of the month containing the first due date.

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7 - FASB Method

 

The FASB method of amortization is based off the interest method of amortization and amortizes each month based on the movement of the principal balance. If the balance decreases, then the system will amortize the fees. If the balance does not change, the fees will not amortize. The FASB method therefore ignores any non-performing statuses (payments not made on the account in more than 93+ days).

 

The amortization works by calculating the rate of the loan from the Face Amount (LNFACE). The face amount should equal the original balance of the loan minus any precomputed interest. The current Principal Balance is compared against the Original Balance to help determine how many months have elapsed since the loan was opened.

 

The following exceptions will prevent amortization from occurring:

 

Action Code (LNACCD) = 23 (Loan Locked in for Payoff) or 39 (Stop fees and cost amortization up to action date)

Hold Code (LNHLD1-4) = 60 (Account Frozen)

Account Released (LNRLSD) set to “Y”

Asset Classification (LNACLS) = 4 (Doubtful) or 5 (Loss)

Trading Indicator (LNTIND) = 2

 

Important: Once the loan has reached maturity (Maturity Date is less than today), the system amortizes the remainder of any amortizing fees (Remaining Fees move to Earned Fees.)

 

The following steps are used to determine how much time has elapsed:

 

1.The system uses the original contractual term (LNTRMO) of the loan to determine the time period. If LNTRMO is blank, the system will use LNTERM. If both are blank, amortization will not occur.
 
Term of Loan = LNTRMO or LNTERM

 

2.The system calculates the extension interest in determining the adjusted P/I and adjusted rate (if needed). This only needs to be done if the account is currently a payment method 3 (LNPMTH = 3), or if the account was converted to a payment method 6 (LNPMTH = 6 and LNPCIB = Yes). It is calculated as follows:
 
Extension Interest = LNOBAL – (LNTRMO * LNOPIC)

 

3.The adjusted Payment Amount is equal to the original P/I (LNOPIC).
 
Payment Amount = LNOPIC

 

4.If the account is currently a payment method 3 (LNPMTH = 3) or was converted to an interest bearing account (LNPCIB = Yes), the adjusted Payment Amount is calculated by taking the Term of Loan times the original P/I (LNOPIC), add the calculated Extension Interest, then divide by the Term of Loan.
 
Payment Amount = ((Term of Loan * LNOPIC) + Extension Interest)/Term of Loan)

 

5.From the new Payment Amount, we calculate the Adjusted Rate of the loan to be used. The Adjusted Rate is calculated using the Term of Loan, the adjusted Payment Amount, and the face amount of the loan (LNFACE). The following Excel calculation can assist:

 

Adjusted Rate = Rate (Term of Loan, Payment Amount,-LNFACE)*12

 

6.Now that we have calculated the adjusted Payment Amount and Adjusted Rate, we can now calculate how many periods have elapsed. Based on the current payment method and whether the account was converted from a payment method 3 will determine how to calculate the periods elapsed. (Note: The calculation of the elapsed periods should never be greater than the Original Term of the loan.)

 

If the payment method is equal to 3 (LNPMTH=3), the elapsed periods are calculated as follows:

 

Elapsed Periods = (LNOBAL - LNPBAL)/Payment Amount

 

7.If the payment method is not equal to a 3 (LNPMTH<>3) and the account was not converted from a payment method 3 to a 6 (LNPCIB<>Yes), the elapsed periods are calculated using the following Excel calculation:

 

Elapsed Periods = NPER(AdjustedRate/12,Payment Amount,-LNFACE,LNPBAL)

 

Note: If you were to calculate the same formula in logs, the following calculation could replace NPER:

 

Elapsed Periods = (-log(1-(LNFACE/Payment Amount)*(Adjusted Rate/12))+log(1-(LNPBAL/Payment Amount)*(Adjusted Rate/12)))/log(1+(Adjusted Rate/12))

 

If the payment method is not equal to a 3 (LNPMTH<>3) and the account was converted from a payment method 3 to a 6 through PC2IB (LNPCIB=Yes), the elapsed periods are calculated as follows:

 

Elapsed Periods = (LNOBAL-LNPBAL)/Payment Amount

 

Now that we have calculated how many periods have elapsed based on the change in balance, we can calculate the amount of amortization.

 

1.The system calculates a new payment amount on the loan. This will allow us to continue amortization if the payment of the loan ever changes. The following Excel calculation can assist:

 

New Payment = (LNFACE+LN78OI)/Term of Loan

 

2.Next, the system calculates a new rate on the loan. This will allow us to continue amortization if the rate of the loan ever changes. The following Excel calculation can assist:

 

New Rate = Rate (Term of Loan, New Payment, -LNFACE)*12

 

3.Next, the system calculates the cumulative amount of interest amortized over the elapsed periods. The following calculation Excel can assist:

 

Total Earned Amount = -CUMIPMT((New Rate/12), Term of Loan, LNFACE, 1, Elapsed Periods, 0)

 

4.Finally, amortization will be the difference between the remaining amount of the fee, the original amount, and the calculated earned amount. The total amount of earned fees cannot be greater than the original amount of the fee (F1FORG).

 

Fee Amortization = Remaining fees - (Original Fee - Total Earned Amount)

 

5.Amortization will decrease Remaining fees (F1GREM) for fee amortization. If the above calculation creates a negative amount, amortization (or un-amortization) will not occur.

 

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8 - Daily Pro Rata Amortization Method

 

Daily Pro Rata uses the following information to figure the fee amount the financial institution can take in a certain period. The period is determined using the Pro Rata Days field.

 

The Daily Pro Rata amortization method calculates the number of days from the open loan date (LNOPND) to each monthend to determine the amount to amortize and the remaining unearned amount (Remaining field). The value entered in the Pro Rata Days field (F1PRDY), determines the number of days to amortize the amount.

 

The following table shows examples of how these values calculate for a loan opened (LNOPND) on December 15th where the Pro Rata Days (F1PRDY) value is 90 (90 days) and the fee amount is $90.00.

 

Opened Dec. 15/ Pro Rata Days = 90/ Total Fees = $90

 

 

March monthend will amortize only 15 days because March 15 is day 90.

 

Note: If the value entered in the Pro Rata Days field is changed to less than the number of days difference from the open loan date and the next monthend run date, the entire remaining amount of the fee should amortize to zero at monthend. If the number of days is increased, the system will recalculate the amount to amortize and determine if the system should amortize or not due to the remaining difference.

 

The following will prevent the fees from amortizing:

 

1.If account is non-performing (LNNONP = Y).

2.If General Category (LNGENL) is 80-84 and 86-89.

3.If the account is service released (LNRLSD = Y), do not allow the fees to amortize.

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10 - Straight Line Using Due Date Day

 

This calculation is similar to the regular straight line method 1 except in the way the terms are calculated. The Anniversary of the 1st Due Date is used to determine refunds and earned amounts. The steps are:

 

1.The original term (OTERM) is taken from the original loan term (LNTRMO) if it is populated. Otherwise, the current loan term (LNTERM) is used.

 

2.The start date of the amortization is calculated as the open date of the loan, as of the anniversary of the first due date of the loan. So if the loan was opened on June 2nd and the first due date was July 5th, then the start date for the amortization will be June 5th.

 

3.The elapsed term (ETERM) is the days difference from the start date of the loan to the run date of the amortization. This is not allowed to be more than the original term.

 

4.The remaining term (RTERM) is calculated using the formula:

 

RTERM = OTERM – ETERM

 

5.A per diem amount is calculated using:

 

PERDIEM = F1FORG / OTERM

 

6.The new unearned or remaining amount that will replace F1GREM is calculated by:

 

UNEARNED = PERDIEM X RTERM

 

7.The amount that is earned this month is the difference in this unearned amount and what is on the file in F1GREM.

 

EARNED THIS MONTH = F1GREM - UNEARNED

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11 - LOC FASB Method

 

The LOC FASB method of amortization is based off the interest method of amortization and amortizes each month based on the movement of the principal balance. If the balance decreases, then the system will amortize the loan. If the balance does not change, the loan will not amortize. The amortization for line-of-credit loans works by calculating the payment of the loan from the original promotional balance (NLOBAL) and the card rate (LNRATE or LNORTE). The current promotion balance (NLPBAL) is compared against the original promotion balance to help determine how many months have elapsed since the loan was opened.

 

The following exceptions will prevent this amortization method from occurring:

 

•Action code (LNACCD) is equal to 23 (loan locked for payoff) or 39 (stop fees and cost amortization up to action date).

•Hold code (LNHLD1-4) is equal to 60 (account frozen).

•The account is service released (LNRLSD).

•The Asset Classification (LNACLS) on the Loans > Account Information > Additional Loan Fields screen, Valuation/Billing tab is set to "Doubtful" or "Loss."

•The Trading Indicator (LNTIND) on the Loans > Account Information > Additional Loan Fields screen, Valuation/Billing tab is set to "Held for Resale."

•The loan is not a card loan (LNCARD does not equal "Y").

 

The loan is not a payment method 5 loan (line-of-credit).

 

Note: The calculation for this amortization method uses the card rate to calculate the payment and amortization amounts.

 

The amortization method is calculated with the following steps:

 

1.The system uses the term of the promotion (NLTERM) or the deferred fee or cost term (F1TERM) to determine the time period. If the term is blank, amortization should not occur. We need to calculate the payment amount based on the card rate of the loan. The payment amount is calculated using the rate of the card, term of promotion, and the original balance of the promotion (NLOBAL). If you use Microsoft Excel®, the following Excel equation explains how to calculate this:

 

New Payment Amount =PMT(LNRATE/12, NLTERM or F1TERM, -NLOBAL)

 

2.Now that we have calculated the Payment Amount, we can calculate how many periods have elapsed.

 

Note: The calculation of elapsed periods should never be greater than the Original Term of the loan.

 

This is calculated using the following Excel equation:

 

Elapsed Periods =NPER(LNRATE/12, New Payment Amount, -NLOBAL, NLPBAL)

 

Note: If you were to calculate the same formula in logs, the following calculation could replace NPER:

 

Elapsed Periods: (-log(1-(NLOBAL/New Payment Amount)*(LNRATE/12)) + log(1-(NLPBAL/New Payment Amount)*(LNRATE/12)))/log(1+(LNRATE/12))

 

Now that we have calculated how many periods have elapsed based on the change in balance, we can calculate the amount of amortization.

 

Deferred Costs

 

The amortization for deferred costs (Deferred Cost is marked) is calculated using the following steps:

 

1.In order for costs to amortize, method "011–LOC FASB" needs to be selected from the Amortization Method field (F1GMET) in the General Ledger Information field group on the Loans > Account Information > Amortizing Fees and Costs screen.

 

2.If the loan has a cost associated with it, the rate can be calculated by using the Term of Promotion (NLTERM or F1TERM), the New Payment Amount, and adding the Original amount of the cost (F1FORG) to the original promotion balance (NLOBAL). It would be calculated in Excel as follows:

 

Loan Cost Rate =RATE(NLTERM or F1TERM), New Payment Amount, (NLOBAL+F1FORG))*12

 

3.The system calculates how much needs to amortize by taking the difference between the cumulative amount of interest earned at the card rate for the promotion and cumulative amount of cost. It would be calculated in Excel as follows:

 

Earned Cost =-CUMIPMT(LNRATE/12, NLTERM or F1TERM, NLOBAL, 1, Elapsed Periods, 0)+CUMIPMT(Loan Cost Rate/12, NLTERM or F1TERM, (NLOBAL+F1FORG), 1, Elapsed Periods, 0)

 

4.Amortization will be the difference between the remaining amount (F1GREM), the original amount (F1ORG), and the calculated earned amount (Earned Cost). The total amount of Earned Cost cannot be greater than the original (F1FORG).

 

Cost Amortization Amount =F1GREM - (F1FORG - Earned Cost) (Note: The Earned Cost cannot be greater than F1FORG.)

 

5.Amortization will decrease the following field: F1GREM for any cost amortization. If the above calculation creates a negative amount, amortization (or unamortization) will not occur.

 

Deferred Fees

 

The amortization for deferred fees (Deferred Cost is left blank) is calculated using the following steps:

 

1.In order for fees to amortize, method "011–LOC FASB" needs to be selected from the Amortization Method field (F1GMET) in the General Ledger Information field group on the Loans > Account Information > Amortizing Fees and Costs screen.

 

2.If the loan has a fee associated with it, the rate can be calculated by using the Term of Promotion (NLTERM or F1TERM), the New Payment Amount, and subtracting the original amount of the fee (F1FORG) from the original promotion balance (NLOBAL). It would be calculated in Excel as follows:

 

Loan Fee Rate =Rate(NLTERM or F1TERM), New Payment Amount, (NLOBAL+F1FORG))*12

 

3.The system calculates how much needs to amortize by taking the difference between the cumulative amount of interest earned at the card rate for the promotion and cumulative amount of fees. It would be calculated in Excel as follows:

 

Earned Fee =-CUMIPMT(LNRATE/12, NLTERM or F1TERM, NLOBAL, 1, Elapsed Periods, 0)+CUMIPMT(Loan Fee Rate/12, NLTERM or F1TERM, (NLOBAL+F1FORG), 1, Elapsed Periods, 0)

 

4.Amortization will be the difference between the remaining amount (F1GREM), the original amount (F1ORG), and the calculated earned amount (Earned Loan Fee). The total amount of Earned Loan Fee cannot be greater than the original (F1FORG).

 

Fee Amortization Amount = F1GREM - (F1FORG - Earned Loan Fee)

 

5.Amortization will decrease the following field: F1GREM for any fee amortization. If the above calculation creates a negative amount, amortization (or unamortization) will not occur.

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12 - Actuarial Long Method

 

The Actuarial Long method uses the following formula to calculate the fees/costs rebate:

 

A = P x (N - J - 1) + PL

B = AOL x TJ

C = (P1 - P) x T(J - 1)

D = (P x (TJ - 1)) / I

E = T(EX/30)

Fees/Costs Rebate = A - B + ((C + D) / E)

 

where

 

P = Original monthly payment (LNOPIC)

I = Monthly simple interest rate (LNOAPR)

T = I + 1

N = Original term of loan (LNTRMO)

PL = Last payment (the system uses the original payment (LNOPIC) as the last payment)

P1 = First payment (LNOPIC) plus extension interest (OTXINT)

J = Elapsed months

EX = Number of extension days (OTXDYS)

AOL = Amount of loan (This is the amount financed (OTAFIN).)

 

If there is an acquisition charge (LN78AA), a new monthly payment amount will be calculated as follows:

 

New Monthly Payment = LNOPIC - (LN78AA / LNTRMO)

 

A new rate will be calculated on the new monthly payment amount.

 

The Remaining Fee amount that is calculated by this amortization method will not exceed the Original amount.

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13 - Daily Level Yield

 

This method of amortization accrues amortization on a daily basis for anticipated earnings as of the current day, and then the system runs a full amortization at monthend and clears the accrual amortization. Amortization accrual occurs on the account until it reaches maturity or the loan becomes non-performing (based on option NPDY and options AMOP SAPI and SAAF being set to "Y"). The amortization resumes if the account either becomes performing or the account is charged off.

 

Amortization of costs or fees will cease on the loan if any of the following occurs:

 

•Action Code 23 (Loan Locked for Payoff).

•Action Code 39 (Stop fees and cost amortization up to action date).

•Hold Code 60 (Account frozen), 4 (), or (5).

•Loan is released (LNRLSD = Yes).

•If Trading Indicator (LNTIND) is 2 (Held for Resale).

•If the loan is non-performing.

•If Asset Classification (LNACLS) is 4–doubtful or 5–loss.

 

The following options should stop amortization accrual and full amortization if the loan becomes non-performing (LNNONP = Yes) based on the number of days in institution option NPDY:

 

SAPI – Stop Precomputed G/L Amortization if Delinquent

SAAF – Stop Amortizing Fee Amortization if Delinquent

SAF1 – Stop Amortizing Fee 1 Amortization if Delinquent

SAF2 – Stop Amortizing Fee 2 Amortization if Delinquent

SAF3 – Stop Amortizing Fee 3 Amortization if Delinquent

 

If the loan is charged off (and the charge-off option (COOP) is set to 1 or greater for your institution), the system amortizes the entire amount of the fee/cost that is Remaining (F1GREM) at monthend.

 

Since amortization is based on the elapsed number of days of the loan, the system calculates how many days have elapsed since the loan open date to the current date of amortization, then divides by 30 to determine months. Since amortization is daily, the system ignores the Rebate Rule Days (LN78DR) for the 15/16 day rule. If the account has an extended first period, the amortization could finalize up to 15 days prior to the original maturity date of the loan.

 

ETERM (Elapsed Periods) = DAYS360(LNOPND,CURRENT RUNDATE)/30

 

How the system calculates the fees and costs using this amortization method:

 

1.The system uses the contractual term of the loan (LNTRMO). If LNTRMO is equal to 0, the system then uses the LNTERM.

 

2.The rate of the loan is calculated by the term, principal and interest, and face amount. This is normally calculated in Payment Calculator when the loan is originated. The rate is passed by GOLDTrak into LNRATE and LNORTE:

 

LNORTE (Rate of Loan) = Rate(OTERM, LNOPIC, -LNFACE)*12

The program will use LNORTE if present, otherwise, LNRATE. A zero rate will return an error.

 

The system calculates the rate of the fee/cost by using the number of original days divided by 30, the original principal and interest, and adding the original amount of the fee/cost to the face amount of the loan:

 

ADJRT (Loan Cost/Premium Rate) = Rate (OTERM, LNOPIC, -(LNFACE+F1FORG))*1

 

3.To calculate how much needs to amortize, the system uses LNVAL to amortize the cumulative amount of interest and the cumulative amount of fee/cost and takes the difference between the two. The elapsed periods can have a decimal value which is calculated in the two cumulative amounts. The following calculations can assist:

 

EARNCP (Earned Cost/Premium for accounts less than 30 days old) =

 

(-CUMIPMT(LN0RTE/12,OTERM,LNFACE,1,1,0) * ETERM)

 

+ (CUMIPMT(LNORTE/12, OTERM,(LNFACE+F1FORG),1,1,0) * ETERM)

 

EARNCP (Earned Cost/Premium for accounts greater than 30 days old) =

 

(-CUMIPMT(LNORTE12, OTERM,LNFACE,1,TRUNC(ETERM),0)

 

+ CUMIPMT(ADJRT/12, OTERM,(LNFACE+F1FORG),1,TRUNC(ETERM),0))

 

+ (-CUMIPMT(LNORTE/12, OTERM,LNFACE,1,TRUNC(ETERM),0) * (ETERM - TRUNC(ETERM))

 

+ (CUMIPMT(ADJRT/12,OTERM,(LNFACE+F1FORG),1,TRUNC(ETERM),0) * (ETERM - TRUNC(ETERM))

 

4.Amortization will be the difference between the remaining amount, the original amount, and the calculated earned amount.

 

Cost/Premium Amortization Amount = F1FREM - (F1FORG – EARNCP)

 

(Note: EARNCP cannot be greater than F1FORG.)

 

5.Each day the fees/costs are amortized, the system decreases the amount of amortization from the Remaining field (F1FREM) and increases the Earned field by that amount. On the rare occasion the calculation creates negative amortization in the afterhours, the loan is sent to the Error and Exception Report (FPSRP013) with the message: "Can’t Neg. Amort Deferred Amortizing Cost." You will need to manually correct the error on the account.

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14 - Daily Pro Rata to Maturity

 

This method takes the difference between the Open Date and the calculated Maturity Date (LN1DUE minus one month plus the original term) and determines how many days based on a 360-day calendar have elapsed at the time of payoff (or cancellation) to calculate the Earned percentage. The Earned percentage multiplied by the original amount determines how much was earned. The original amount minus the Earned amount determines the rebate for the borrower.

 

See the following information for a more in-depth view of the calculation for the 14 – Daily Pro Rata to Maturity amortization method code:

 

 

Total Days 360:
Number of days (360-day basis) between the Open Date (LNOPND) and the calculated Maturity Date (LN1DUE minus 1 month plus the original term (LNTRMO)).

 

Elapsed Days 360:
Number of days (360-day basis) between the Open Date (LNOPND) and the Payoff or Amortization Date.

 

Refund Max Date 360:
Number of Months for Max = Refund Days / 30

 

Date Open (LNOPND) plus the Number of Months for Max (360-day basis)

 

Earned%:
Earned % = Elapsed Days 360/Total Days 360

 

Earned:
If Date Open (LNOPND) = Payoff Date, then Earned = 0

 

If Payoff Date > Refund Max Date 360, then Earned = Original Fee (F1FORG)

 

If Earned % * Original Fee > 25, then Earned = 25

 

If Earned % * Original Fee ≤ 25, then Earned = Earned % * Original Fee

 

Refund to Borrower:
Refund to Borrower = Original Fee minus Earned

 

Any refund to the borrower will be displayed on the Adjustments tab on the Loans > Payoff screen.

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16 - Straight Line Using Open Date Day

 

This calculation is similar to the regular straight line method 1 except in the way the terms are calculated. The anniversary of the Open Date is used to determine refunds and earned amounts. The steps are:

 

1.The original term (OTERM) is taken from the original loan term (LNTRMO) if it is populated. Otherwise, the current loan term (LNTERM) is used.

 

2.The start date of the amortization is calculated as (and as of) the Open Date of the loan. If the loan was opened on June 2nd, the start date for the amortization will be June 2nd.

 

3.The elapsed term (ETERM) is the days difference from the open date of the loan to the run date of the amortization. This is not allowed to be more than the original term.

 

4.The remaining term (RTERM) is calculated using the formula:

 

5.RTERM = OTERM – ETERM

 

6.A per diem amount is calculated using:

 

7.PERDIEM = F1FORG / OTERM

 

8.The new unearned or remaining amount that will replace F1GREM is calculated by:

 

9.UNEARNED = PERDIEM X RTERM

 

10.The amount that is earned this month is the difference in this unearned amount and what is on the file in F1GREM.

 

11.EARNED THIS MONTH = F1GREM - UNEARNED

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17 - Rule of 78s...Original -$50

 

This amortization method is for loans originating in Kentucky, which includes earning $50 of the original amount of the fee as of the date opened, then amortizing the remaining amount of the fee. This method is only used at payoff, not for G/L amortization. It also shows on the Amortization Fee Trial Balance Report (FPSRP226).

 

This new amortizing method was created to comply with Kentucky regulatory changes, which states the first $50 of the fee is nonrefundable and the remainder is subject to a pro-rata refund. Only one fee is permitted on a loan or refinance within any 90-day period.

 

The period of amortization for the remaining amount of the fee rolls on the anniversary of the Date Opened (LNOPND) plus 16 days, and on the anniversary of the First Due Date (LN1DUE) plus 16 days thereafter.

 

After the first $50 has been earned as of the Date Opened, the remaining amount of the fee is amortized similarly to the Rule of 78s (Amortization Method 0). The formula for Rule of 78s is as follows:

 

[RINO X (RINO + 1)] / [OINO X (OINO + 1)] X Original Fees, where OINO is the Original Term/Installments and RINO is the Remaining Term/Installments.

 

If the amortization occurs prior to the Date Opened (LNOPND) + 16 days, then the Elapsed Term (ETERM) is set to zero (0). All but $50 will be refunded if the loan is paid off prior to the Date Opened (LNOPND) + 16 days. In other words:

 

•Month 1 of fee amortization is earned at LNOPND + 16 days.

•Month 2 of fee amortization is earned at LN1DUE +16 days.

•Every additional month of fee amortization is earned on the anniversary of LN1DUE + 16 days.

 

Examples:

 

 

Amortization Example

 

Date Opened (LNOPND) = 07/22/2008

First Due Date (LN1DUE) = 08/22/2008

Loan Maturity Date (LNMATD) = 07/22/2023

Term in Months (LNTRMO) = 180

Original Amount of Fee (F1FORG) = 130.60

 

 

If you will be using this amortization method, you should also make sure the Include in Payoff field is checked, and do not use a Refund Rule with this method.

 

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