Delinquency

What is Delinquency Method B?

Delinquency Method B calculates delinquency for closed-end loans with a term greater than 15 years as of August 1, 1989. Delinquency Method B tracks the amortization of the loans to determine delinquency.

The amortization schedule is similar to the payment history. However, the payment history reflects actual activity, and the amortization schedule reflects activity according to the terms of the loan. Loan information on the amortization schedule is referred to as should-be information, such as should-be payments and should-be interest because these are the payments, as they should be applied to the loan if the member meets the terms of the loan. Payments made according to payment history are referred to as actual payments.

To determine delinquency, Portico calculates an actual loan payoff and a should-be loan payoff. The actual loan payoff is subtracted from the amortized or should-be loan payoff to arrive at total delinquency in arrears. Method B also uses grace percentage before reporting the loan as delinquent. Portico recommends using 360-day interest calculation with Delinquency Method B.

What is Delinquency Method D?

Delinquency Method D calculates delinquency for open-end and closed-end loans based on the next payment due date on the Loans tab.

Difference Between Method D and Method B

The major difference in calculating delinquency between Method D and Method B is interest due. Method D calculates delinquency by using the next payment due date and the calculation date. After Portico determines the number of delinquent payments to arrive at the delinquent amount, that number is multiplied by the scheduled payment amount.

Method D does not consider a loan delinquent as long as the member makes the scheduled payment amount by the due date. If the payment is even one day past the due date, the loan is delinquent.

Method B considers a loan delinquent if the terms of the loan are not met. For example, if a member consistently pays late, in most cases, Method B would consider the member delinquent. This is because more monies of the should-be payment would go to interest due instead of reducing the principal. A Method B loan is delinquent if the current loan balance is greater than the should-be loan balance on the Loans - Amortization tab. If the current balance is less than the should-be balance, the member has paid-ahead.

Delinquency Checks

Portico checks all of the member's loans for delinquency, before processing transactions and allowing overdraft protection. Several fields identify the grace period allowed for processing transactions and allowing overdraft protection when a member has a delinquent loan.

On the Credit Union Profile - ACH/Payroll tab...

• The Grace Indicator field indicates the grace period allowed before reporting a delinquent loan is based on grace days or on a percentage of the scheduled loan payment amount. Valid values are:
  • D - Grace period based on days. Can be used for delinquency method B or D loans. Use Delq Grace field on the 450 Report Rules to specify the number of delinquent days for ACH overdrafting. For ACH loan advances, specify the number of days in the Online Grace field in the in the Delinquency Options section on the Credit Union Profile - Loans tab. System default.
  • B - Grace period based on percentage of scheduled payment for loans using delinquency method B. Specify the percentage in the Grace Percent Delinquent field. Grace period will be based on days for delinquency method D loans. Uses percentage specified in the Grace Percent Delinquent field.
• The Grace Percent Delinquent field indicates the percentage of the scheduled payment that must be delinquent before the loan will appear on any reports or, in the case of the 450 Report or ACH processing, before the system will stop overdrafting. The valid percentages are 0 through 100 percent. Example: 005.00 equals 5 percent. The Grace Indicator field must be B.

On the 450 Report Rules...

• The Grace Ind field on the 450 Report Rules indicates whether the grace period allowed on a delinquent loan is based on grace days or on a percentage of the scheduled loan payment amount. The valid options are:
  • B - The grace period will be based on the percentage of the scheduled payment amount for those loans that use the Delinquency Calculation Method B. The grace period will be based on days for those loans that use Delinquency Calculation Method D.
  • D - The grace period will be based on days. This option can be used for Delinquency Calculation Method B loans and for Delinquency Calculation Method D loans. System default.
• The Delq Grace field on the 450 Report Rules specifies the number of grace days any of the member’s loans can be delinquent before the system will stop performing the following actions:
  • Loan overdraft protection for share drafts and ACH items cleared in the back-office cycle. (Overdraft protection from a share account will still process.)
  • Loan drafts cleared in the back-office cycle.
  • Both share overdraft protection and loan overdraft protection for items cleared by online check clearing using overdraft protection, online banking bill pay transactions and EFT transactions.
• The Delq Prcnt on the 450 Report Rules specifies the percentage of a loan’s scheduled payment amount that must be delinquent before the system will not perform the overdraft (for loans that use the Delinquency Calculation Method B)