HELOC Module

Lending Lending HELOC Module

1. Introduction

The FLEX HELOC (Home Equity Line of Credit) Module is a purchasable module designed to manage Home Equity Lines of Credit within the FLEX system. It handles interest calculations, billing cycles, statement generation, and loan conversions for HELOC products.

2. Key Characteristics of the HELOC Module

The HELOC Module is characterized by the following features:

  • Purchasable Module: An add-on module for the FLEX system.
  • Loan Group Code = H: HELOC loans are designated by the ‘H’ group code.
  • Interest Calculation: Interest is calculated based on the Average Daily Balance.
    • Interest is calculated on the Average Daily Balance of the current statement period.
    • Interest is memoed to be collected at the time of payment.
    • Calculation: Multiply interest rate by average period balance, then divide the result by the number of days in the period.
  • Payment Calculation:
    • If a HELOC is not an interest-only payment, the payment is calculated based on the loan type’s configuration.
    • Interest due is still based on the average daily balance of the prior period.
    • If interest due is greater than the calculated payment, the payment is increased to cover the interest due.
  • Billing Cycle: Encompasses interest due, payment calculation, and statement generation.
  • Interest-Only Payment: Supports interest-only payment options.
  • Loan Conversion Program: Can utilize a loan conversion program when the draw period expires.
  • Variable Interest Rate: Supports variable interest rates.
  • Credit Limits: Loans of type V, L, and H will have credit limits, preventing the system from closing the suffix during End of Month if the balance is zero.
  • Month-End Billing Cycles: Group codes V and H instruct the system to use month-end billing cycles.

3. Group Codes for Home Equity

Group codes are system-defined designations that group loans with common features and dictate how system functions impact them.

  • H = Home Equity Line of Credit: Used for line of credit loans, typically secured by real property, with a period where the monthly payment amount is the interest due for that month. These loans have their own month-end billing process and statements on the FLEX system.
  • L = Line of Credit: Used for general lines of credit.

4. Home Equity LOC Payment Calculations (Payment Recalculation Methods)

The following calculation methods can be configured for Home Equity LOC payments:

  • C = Calculate based on current calculated payoff: System calculates when the loan will pay off using current loan variables (balance, interest rate, frequency) and determines a new payment amount based on these factors and the calculated term.
  • I = Interest only payment.
  • M = Calculate based on original maturity: System determines when the loan would have originally matured and calculates the payment to ensure payoff at that time.
  • O = Calculate based on original term of loan.
  • P = Calculate based on percentage of balance: Not valid for balloon loans.
  • Q = Calculate based on term table defined: Not valid for balloon loans.
  • R = Calculate based on remaining term of loan: System determines how many payment frequencies have passed since the loan was opened (or last advance date), subtracting this number from the original term to determine the remaining term.
  • T = Calculate based on payment table defined: Not valid for balloon loans.

5. HELOC (H) – Control Parameters (HE1070S)

Control Parameters allow for the configuration of GL offsets, statement sequence, and End of Month Processing specifically for ‘H’ group loans.

5.1. GL Offsets & Fees

  • Over Limit Fee GL: Defines the General Ledger (GL) account for posting over-limit fees.
  • Cash Advance Fee GL: Defines the GL account for posting cash advance fees.

5.2. Statement Processing

  • HELOC Statement Sequence Code: Determines the print order of HELOC statements:
    • 1: According to setup order
    • 2: By account and suffix
    • 3: By zip code
    • 4: By name (Last, First)
  • CASS Certification: Indicates if statements should be sorted into CASS-certified or non-CASS-certified addresses. Non-CASS addresses are printed first if CASS is specified.
  • HELOC Statement Printer: Specifies the printer Output Queue (OUTQ) where statements will be spooled and held.
  • HELOC Statement Message: Contains the message that will appear on the top portion of the statement.
  • Account Number Mask: Allows masking of the account number on the printed statement. Enter a replacement character (e.g., X) in positions to be masked.
  • XML Exit Program (HE44212R): Used for sending statements to a third party for printing (record length 256).
  • Load STMT Fee File: Set to Y if the Statement Fee program is used and the credit union charges a fee for paper HELOC Statements.

5.3. HELOC Month End Processing

  • Last Statement Date: Displays the date of the last EOM process run and statement production.
  • Create Statement if No Activity: Determines if a statement should be produced even if the account had no activity during the month.
  • Exclude Unpaid Int from Ave Dly Bal: Indicates whether to exclude unpaid interest from the average daily balance calculation (used for required payment determination).
  • Reset Partial Payments: If Y, partial payments will reset to $0.00 during HELOC EOM.
  • Preload Partial Payments if Delinquent: Indicates if partial payments should preload if the account is delinquent.
  • Update Orig Balance at Conversion: If Y, the original balance on the HELOC Loan will update to the new balance at the time of conversion if the loan is set to convert upon draw period expiration.
  • Print Conversion Pre-Notice on Stmt: Indicates if pre-notice text configured for the original loan type should print on the statement if the loan is subject to conversion. Text is set up on the Conversion tab for the original loan type in Type Configuration, Loan Types tab.
  • Print Conversion Notice on Stmt: Indicates if conversion notice text configured for the original loan type should print on the statement if the loan is subject to conversion. Text is set up on the Conversion tab for the original loan type in Type Configuration, Loan Types tab.
  • Max Days Delq for EOM Charges: Displays the maximum number of days a loan payment can be delinquent for End of Month charges to be made.
  • Prompt/Print New Rate on Statement: Indicates if the new rate should print on all statements. Note that this does not actually change loan rates.
  • Interest Only Payment: Indicates if the payment amount equals the interest due for the prior month (based on average daily balance).
    • Y: Entire payment goes to interest (interest-only).
    • N: Payment is calculated based on loan type configuration (Payment Recalculation tab). If interest due is greater than calculated payment, payment increases to cover interest.
    • T: Parameter is specified by loan type.
  • Add Last Ins Prem to Pmt (int only.): Indicates if the last insurance premium posted should be added to the payment amount on interest-only HELOC loans. Applicable only if payment is interest-only and loan has CD/CL insurance.

6. Loan Type Configuration (HELOC Tab)

The “HELOC” tab within “Edit Loan Type” allows for specific configuration of HELOC fees and month-end processing defaults.

6.1. HELOC Fees

  • Over Limit Grace Amount: Fixed amount a loan may exceed the credit limit before over-limit fees are assessed.
  • Over Limit Grace Percent: Percentage by which a loan may exceed the credit limit before over-limit fees are assessed.
  • Over Limit Fee Rate: Rate used to calculate the over-limit fee.
  • Over Limit Fee Minimum/Maximum: Defines the minimum/maximum over-limit fee to charge.
  • Advance Minimum/Maximum: Indicates the minimum/maximum cash advance for the loan type.
  • Monthly Advance Maximum: Indicates the maximum monthly amount for an advance.
  • Monthly Advance Count Maximum: Indicates the maximum count of monthly advances.
  • Cash Advance Fee Rate: Rate used to calculate the cash advance fee.
  • Cash Advance Fee Minimum/Maximum: Indicates the minimum/maximum cash advance fee.

6.2. Finance Charge Information

  • Minimum Finance Charge: Minimum finance charge to be applied to the loan. If the calculated finance charge is less than this amount, this minimum amount will be charged.
  • Minimum Balance For Finance Charge: Minimum balance required to receive a finance charge. If the loan balance is lower than this amount, no finance charge will be applied.

6.3. HELOC Setup Default Values

  • Charge Over Limit Fee: Indicates if an over-limit fee will be charged.

6.4. Month End Processing

  • Interest Only Payments: Indicates if the payment is interest-only. If unchecked, payment is calculated based on the “Payment Recalculation” tab, but interest due is still based on the average daily balance.
  • Minimum Principal Payment Amount: Indicates the minimum principal amount to be included in the required payment.
  • Add Interest To Payment: If the payment is a percentage of the balance, this determines if new interest should be added.
  • Use Original Balance: If the payment is a percentage of the balance, this determines if the percentage should be based on the original balance.
  • Print Principal/Interest Breakdown: Indicates if the next payment breakdown should be printed on the statement.

7. HELOC Maintenance (HE1010S / HE1011S)

HELOC Maintenance lists all HELOC loans on the system and allows for changes to existing HELOC loan records.

7.1. HELOC Loan Maintenance (List View)

  • Columns: Account, Suffix, Type, Member Name, Current Balance, Open Date.
  • Allows selection (s) to view/modify individual records.

7.2. HELOC Loan Record (Modify View)

Provides detailed information for a selected HELOC loan:

  • Previous Month Information: HELOC Month End Date, Int Accrual Date, Balance, Credit Limit, Available Credit, Accrued Int Previous Mon, Required Payment, Delinquent Amount.
  • Current Information: Month End Balance, Average Daily Balance, Accrued Int for Month, Memo Interest, Unpaid Interest, Over Limit Fee Charged.
  • Conversion Information: New Type, Conversion Date, Notice Date, New Term, Recalculate Payment, Reset Loan Open Date.
  • Fee Parameters: Monthly Over Limit Fee (Y/N), Cash Advance Fee (Y/N).

8. Re-Running Statements

If statements need to be re-run:

  1. Select Re-Run Statements from the HELOC Loans menu.
  2. Enter the statement End of Month Date.
  3. Select Process.

9. Loan Type Conversion

Loans can be configured to convert from one loan type to another after a specified period using the Loan Type Conversion program. This is particularly useful for HELOCs that transition from an initial draw period to a repayment period.

9.1. Loan Maintenance (Type Conversion Tab)

The “Type Conversion” tab within Loan Maintenance allows for setting up and maintaining conversion records.

  • Current Loan Type: Displays the current loan type.
  • New Loan Type: Defines the type of loan it will convert to on the conversion date.
  • Conversion Date: Determines the date the loan will convert to the new loan type.
  • Notice Date: Indicates the date a notice will be sent regarding the conversion.
  • New Term: Indicates the new term of the loan after conversion.
  • Recalculate Payment: Indicates if the loan payment should be recalculated at the time of conversion.
  • Reset Loan Open Date: Indicates if the open date of the loan should reset to the conversion date or remain the original disbursement date.

9.2. Running Loan Type Conversions

Loan Type Conversions are run through the Loans menu in the FLEX Main Menu:

  1. Navigate to Loans.
  2. Expand HELOC Loans.
  3. Select Loan Type Conversion.
  4. Loan Type: Indicates the loan type(s) to convert. You can convert individual loan types or select “All” to convert all loans with a conversion record setup.
  5. Effective Date: Enter the effective date of conversion. This considers the open date of the original loan and the “Months Until Conversion Date” number.
  6. Update Files:
    • Check Yes to update files.
    • Check No to run a worksheet (simulation). FLEX recommends running a worksheet prior to updating files.
  7. Run Type:
    • Print Notices: Generates pre-notices or disclosures.
    • Convert Loan Types: Shows which loans are going to convert using the effective date.
  8. Click Process to initiate the conversion or notice generation.

10. Confidentiality Notice

This document is published by Computer Marketing Corporation/FLEX and is intended solely for its contracted clients. It may contain information that is privileged, confidential, or otherwise protected from disclosure. Dissemination, distribution, or copying of this document and any accompanying attached information by someone other than the intended recipient(s), or an employee or agent acting on behalf of the intended recipient, is strictly prohibited.