1. Loan Servicing User Guide
  2. Appendix : Account Acceleration
  3. Account Acceleration and Reversal with ‘Interest First’ adjustment

D.5 Account Acceleration and Reversal with ‘Interest First’ adjustment

Consider a loan account with following details:
  • Contract Date = 01. Jan 2017
  • Contract Maturity Date = 31.Dec 2017
  • Rate = 4.99%
  • Term = 12 Months
Balances before Account Acceleration for a Pre-Compute loan.

Table D-7 Pre-Compute

Type Posted Paid Waived Adjusted Balance

ADV/INT

(Pre-compute)

12300

(12000 + 300)

 500 0 0 11800
Acceleration Transaction (PC 2 SI)
  • Txn Date = 16.Aug. 2017
  • Reschedule St Dt = 01.Sep. 2017
  • Amount = 11800
  • Rate = 4.99
  • Term = 1

Principal Adjustment - Minus Transaction

If Paid Principal Balance > Estimated Interest - Rebate

Pass rebate amount

Else

Post transaction with Estimated Interest Amount

Interest Adjustment - Plus Transaction

If Paid principal > Interest Estimated - Rebate

Pass 0

Else

Estimated Interest - Rebate - Posted = 300 -100 -100 = 100

On posting of Acceleration Txn following transactions would be posted on account:
  • Txn 1 - PC 2SI (with about values) = 0
  • Txn 2 - Interest Rebate = $100 (Assumed number) - Pass 11800 for rebate calculation
  • Txn 3 - New Principal Adjustment Txn = Outstanding Principal = 11800
  • Txn 4 - Post 'Principal Adjustment minus = 100'
  • Txn 5 - Post 'Interest Adjustment Plus = 100'
Balances after posting Acceleration transaction

Table D-8 Acceleration transaction

Type Posted Paid Waived Adjusted Balance
ADV 11800 0 - Principal Adjustment Minus = 100 11700
INT 0 0 - Interest Adjustment Plus = 0 0

ADV/ INT

(Pre-compute)

 12300 500+Rebate Amount (100) 12300 - (500+100) 0 0

Since payment is received after acceleration (i.e. same day), there is no additional interest accrual).

In case payment is received of $350 subsequently on account acceleration (Principal adjustment spread)

Table D-9 Principal adjustment

Type Posted Paid Waived Adjusted Balance
ADV 11800 350 0 -100 11350

ADV/ INT

(Pre-compute)

 12300 500+Rebate Amount (100) 12300 - (500+100) 0 0
INT 0 0 0 0 0

Reversal of Account Acceleration after above Payment posting

Transactions are reversed / posted on account automatically.
  • Reverse Txn 6 - Payment Txn
  • Reverse Txn 5 - Interest Adjustment Plus = 100
  • Reverse Txn 4 - Principal Adjustment minus = 100
  • Reverse Txn 3 - New Principal Adjustment Txn
  • Reverse Txn 2 - Interest Rebate
  • Reverse Txn 1 - PC 2SI (with about values) = 0
  • Re-post - Txn 6 - Payment
Balances after reversal

Table D-10 Balances after reversal

Type Posted Paid Waived Adjusted Balance

ADV/ INT

(Pre-compute)

 12300

850

(500 + 350)

 0 0 11450

Parent topic: Appendix : Account Acceleration