Re-Amortization

You can re-define the installment schedules of an amortized contract as if the maturity date of the contract has been extended for schedule re-calculation purpose. You can specify a new end date (temporary maturity date) for calculation purpose. The installment amount is recalculated based on the remaining schedules and the new tenor, where the tenor is considered between the re-amortization value date and the new end date. The installment schedules derived beyond the maturity date is added up and parked in the bullet schedule, this results in high payment amount in the bullet schedule. You need to maintain the following details for re-amortization:

The Allow Re-amortization box in the Product Preference screen is enabled only if the Product schedule type is Amortized.
You can maintain the Re-Amort Date in the Value Dated Amendment (VAMI) screen.

System performs the following validations:

It is not possible to amend the Re-Amort Date with other existing fields in single operation.
Back value dated re-amortization is allowed however the Value date of the re-amortization should not be earlier than the last liquidation date, and it should not be earlier then last re-amortization date.
Future value dated re-amortization is not allowed.
Re-amortization can be done even if the contract has un-paid (overdue) schedules. In such instances, only the future outstanding principal schedules are considered for re-amortization.
Re-amortization request placed in the middle of the cycle also considers the current schedule for re-amortization calculation.
For example, if the contract schedule is monthly and re-amortization request is received in the middle of the month, it also considers the current schedule.
A re-amortized product contracts can have only one frequency linked to a contract schedule in addition to the bullet schedule.
For example, Schedule maintenance with combination of monthly and quarterly are not allowed, it can either have all monthly or quarterly schedules and not combination of both.

System performs the following processing:

Re-amortization processing happens during the save operation from the VAMI screen.
It is possible to delete the un-authorized entries or reversal of authorized entries for a re-amortization amendment details for the other existing fields in the VAMI screen.
System validates the Value Date. After all other validations are done, the reamortization process is triggered during save operation.
Re-Amortization is processed based on current principal outstanding balance.
System derives the installment amount. System uses the following parameters to derive the new installment amount:
- Calculation Start Date= Amendment value date
- Calculation End Date= Re-Amort Date
- Balance= Principal outstanding balance
- Rate= Current rate applicable for the contact.
System maintains an amortization table till the Re-amort end date, the new installment amount in this table is retained till the original penultimate bullet schedule and the installment schedules beyond maturity date onwards is added up and parked to the original bullet schedule. This may result in a very high balloon payment in the bullet schedule.
Re-amortization process triggers a VAMI event. A version number and event sequence number is created during this operation.
Rate change, CAMD, Principal amount change/maturity date change through VAMI have an impact on the EMI; and the installment amount (and balloon payment on bullet schedule) is calculated based on the Re-Amort Date.

The following parameters are available at branch level (CSBRAPRM):

Restore On Payment Reversal
Select this check box if you want to re-instate the original payment details rather then recomputing the details. For CCC branches, this check-box must be selected.
Restrict Multiple VAMI
Select this flag to indicate that multiple changes in a single VAMI operation are restricted. For CCC branches, this check box must be selected.
Restrict Multiple Freq
For CCC branches, select this check box. Re-amortization cannot be done if an amortized contract has different payment frequencies maintained, this is restricted for CCC branches based on this parameter.
If the flag is selected, schedule maintenance with combination of monthly and Quarterly payment frequencies are not allowed, it can either have all monthly or all quarterly schedules.

The following example explains Re-Amortization functionality. Assume that you have disbursed a loan with the following details:

Principal – 10,000 USD
Interest Rate – 2.25%
Contract Start Date – 01-Dec-04, First due date is 31-Dec-04
Contract Maturity Date – 30-Nov-05
Term / Tenor {In Years} – 1.00
Basis of Tenor – Actual/365
Tenor Frequency – 12
System generated EMI – 843.51 USD

Based on the reducing balance method, the interest, principal, and the EMI are as follows:

Schedule Sl. No	Date	Interest	Principal	Principal o/s	EMI
-	1-Dec-04	-	-	$10,000.00	-
1	31-Dec-04	$19.11	$824.40	$9,175.60	$843.51
2	31-Jan-05	$17.53	$825.98	$8,349.62	$843.51
3	28-Feb-05	$14.41	$829.10	$7,520.53	$843.51
4	31-Mar-05	$14.37	$829.14	$6,691.39	$843.51
5	30-Apr-05	$12.37	$831.14	$5,860.25	$843.51
6	31-May-05	$11.20	$832.31	$5,027.94	$843.51
7	30-Jun-05	$9.30	$834.21	$4,193.73	$843.51
8	31-Jul-05	$8.01	$835.50	$3,358.23	$843.51
9	31-Aug-05	$6.42	$837.09	$2,521.14	$843.51
10	30-Sep-05	$4.66	$838.85	$1,682.29	$843.51
11	31-Oct-05	$3.21	$840.30	$842.00	$843.51
12	30-Nov-05	$1.56	$841.99	$0	$843.55

If we assume that Re-amort Request is triggered on 15-Apr-05, then the modified schedules are as follows:

Schedule Sl. No	Date	Interest	Principal	Principal o/s	EMI
-	1-Dec-04			$10,000.00	-
1	31-Dec-04	$19.11	$824.40	$9,175.60	$843.51
2	31-Jan-05	$17.53	$825.98	$8,349.62	$843.51
3	28-Feb-05	$14.41	$829.10	$7,520.53	$843.51
4	31-Mar-05	$14.37	$829.14	$6,691.39	$843.51
5	30-Apr-05	12.37	602.81	$6,088.19	$615.18
6	31-May-05	$11.63	$603.55	$5,484.65	$615.18
7	30-Jun-05	$10.14	$605.04	$4,879.61	$615.18
8	31-Jul-05	$9.32	$605.86	$4,273.76	$615.18
9	31-Aug-05	$8.17	$607.01	$3,666.74	$615.18
10	30-Sep-05	$6.78	$608.40	$3,058.34	$615.18
11	31-Oct-05	$5.84	$609.34	$2,449.01	$615.18
12	30-Nov-05	$4.53	$2,449.01	$0	$2,454.67