Negative Amortizing Loans |
  
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Navigation: Loan Event Processing > Event Description >
Negative Amortizing Loans |
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If the loan is a negative amortizing loan (see the Loans > Account Information > ARM Information screen, Rate Caps & Negative Amortization tab), the letter number is the event number plus 200. For example, if event 1 is selected for a negative amortizing loan, the letter number is 201.
A letter from the 200 series is generated whenever the system calculates the next interest rate, the Next P/I Constant, or both and, because of the caps, the new calculated P/I is lower than the required Amortized P/I and the Interest P/I. For example:
New Calculated P/I |
= |
$490 |
Required Amortized P/I |
= |
$520 |
Interest P/I |
= |
$500 |
then a letter from the 200 series is generated. |
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If the new calculated P/I is lower than the Amortized P/I, but greater than the Interest P/I, then the 300 series letter is generated. For example:
New Calculated P/I |
= |
$490 |
Required Amortized P/I |
= |
$500 |
Interest P/I |
= |
$480 |
then a letter from the 300 series is generated. |
The system will calculate the Amortized P/I and the Interest Only P/I, and show these amounts on the Loans > Account Information > ARM Information screen, Rate Caps & Negative Amortization tab (for ARM loans, payment method 7). These amounts can also be printed on 200 and 300 series AML event letters using the correct merge fields. The borrower is not required to pay the Amortized P/I, but if the borrower does, the loan will continue to fully amortize over the remaining term of the loan. If the borrower chooses to pay the Interest Only P/I, then the Interest Only amount will be applied to the loan.
