Understanding Remittance Calculations
|
|
|
The Remittance and Reporting group box on the Participant Information window lets you define the day the remittance calculations will occur and the day the participant will appear on the Participant Loan Remittance Report 659.
The Participant Loan Remittance Report 659 will run daily. A participant will appear on the report monthly according to the Day field and the Next Report Date field defined on the Participant Information window. For example, if participant ABC is set up with a Day field 15 and a Next Report Date field of 11/15/2015, participant ABC will appear on the report on the 15th of each month. If the Active check box on the Participant Information window is not selected, the participant will not appear on the 659 Report. If the Active check box is selected, but the participant has not had activity for the current reporting period, the participant will appear on the 659 Report with zero amounts. When the Participant Loan Remittance Report 659 is run, the Next Report Date, Last Report Date, Principal Balance and Uncollected Interest fields on the Loans - Participation Info tab will automatically be updated.
You can use the Test Run check box to generate a test report to review the activity of a specific participant and estimate the remittance due. The test run is generated in the back office cycle on the current day. The Test Run check box will allow the participant to appear the 659 Report, but will not affect the Next Report Date field. A test run cannot be requested on the same day as the date in the Next Report Date field.
The interest remittance amount is determined by payments received and the actual amount of interest applied to the loan. The participant interest rate is retained at the member note level on the Loans - Participation Info tab.
The loan balance used to calculate the participant’s portion of the balance is the principal balance of the loan at the time the payment is applied. The balance may include loan insurance premiums added on at month end or any advances during the month. The participant’s percentage portion is retained in the Percentage field on the Participant Information window. The percentage at the time the payment is applied will be used in the calculation.
Calculation Examples
The balance of the loan will not be used to calculate the participant’s portion of the loan (365 day calculation). The percentage used to calculate the participant’s portion of the loan balance is the participant’s percentage at the time the payment is applied (effective date). The participant’s percentage rates along with the effective dates of the participant’s percentage rates will be evaluated to determine the participant’s principal portion when a payment is applied. The actual principal amount applied to the loan X the participant’s percentage will be used to calculate the participant’s principal. For example:
|
Member has a loan balance = $100,000 Member Interest Rate = 6% Participation portion of Loan Balance = 35% Participation portion of Interest = 4% Payment made on loan = $600 |
System distributes loan payment as: Principal = $ 90.41 Interest = $ 509.59 |
The remittance for the participant’s portion of the loan balance would be: 90.41 X 35% = 31.65
If the participant’s loan balance percentage changes during the reporting period, the participant’s portion of the principal loan balance will be calculated using the actual principal amount applied X participant’s percentage.
The participant’s interest rate and effective dates of the interest rates will be evaluated to determine how to calculate the participant’s portion of interest. History will be used to determine the actual interest amount that was applied to the loan at the time the payment is made. For example using the same scenario as above:
|
Member has a loan balance = $100,000 Member Interest Rate = 6% Participation portion of Loan Balance = 35% Participation portion of Interest = 4% Payment made on loan = $600 |
System distributes loan payment as: Principal = $ 90.41 Interest = $ 509.59 |
The remittance for the participant’s portion of interest would be: $509.59 X 35% X (4%/6%)/365 = 118.90 (participant percentage) X (4%/6%) (participant int rate/loan interest rate) or Participant loan balance X participant rate X number of days since last payment
However, if the credit union manually changes the loan interest rate on the member loan during a Calculation Period and manually changes the participant’s interest rate, the effective date of the participant’s interest rate that was changed will need to be considered. When the participant’s remittance is calculated, the system will have to look at the Effective Date fields in the Participation Interest Rates group box to determine the number of days the new rate has been effective. For example using the same scenario as above:
|
Member has a loan balance = $100,000 Member Interest Rate = 6% Participation portion of Loan Balance = 35% Participation portion of Interest = 4% Payment made on loan = $600 Member loan rate changes from 6% to 5% Participant’s portion of interest changes from 4% to 3% |
System distributes loan payment as:
|
The remittance for the participant’s portion of interest would be:
| 164.38/6 X 4 X 35% | $ 38.36 |
| 287.67/5 X 3 X 35% | + $ 60.41 |
| Total Participant’s interest | = $ 98.77 |
The remittance for the participant’s portion of the loan balance would be: 147.98 X 35% = $51.79
If a check is returned before the reporting period, and no fees or insurance add-ons has occurred this will be considered as a “non-payment”.