Introduction to Lending

This module allows banks to use the following lending products: personal loans, vehicle loans, mortgage loans (fixed rate), mortgage loans (variable rate) in a predefined SaaS environment.

The new AU product conditions have been prefixed with AU and the existing core product conditions that have been reused do not have this prefix.

Click here to understand the terms and abbreviations used in this module.

The following AU features are deployed in the AU SaaS environment:

• Rate lock: Rate lock is an agreement between the customer and the bank that allows the customer to lock in the interest rate. This will protect the customer from being exposed to the risk of interest fluctuations. The rate for a new loan is compared to that of an existing loan and the lower of the two rates is applied on the new loan. This comparison is also done when the rate lock is applied after account opening.
• Loan redraw: Redraw facility is a product feature that enables a customer to access the additional funds that were paid which were paid over and above the scheduled repayment amount. If a payment results in an amount being diverted to the UNC (Unspecified Credit) balance, then the customer can recover that amount from the loan account.
• Interest rate change notice: This feature will lock the repayment amount in the case the bank initiated the rate increase so that the new repayment amount will only be effective after a pre-defined notice period (days). When there is a change in the interest rate, an interest rate change notice will be generated in COB.

Auto-Repayment of a Loan from the Redraw Balance

One of the widely offered functions across banks in Australia for its customers is to have offset accounts and redraw functions for mortgage contracts. In Temenos Transact, it is the UNC account (UNC) balance that is used for the redraw function. Any balance in UNC will be net with the loan outstanding (CURACCOUNT) for the purpose of principal interest calculation.

The loan repayment is serviced from the bank’s internal customer accounts or from external accounts through direct debit mandates provided by the customer.

This functionality allows banks to utilise the redraw balance for repayment of the loan and when the direct debit claim is failed and again failed after being re-tried two times additionally or when the repayment from the bank’s internal account is failed.

The booking date of such transaction will be the date on which the redraw amount is taken.

The DD.RETURN,AULEND.POST.RETURN.DD version has been introduced as part of this functionality to allow users to process the returns received and do resubmissions for collection.

When the loan repayment is failed through the settlement account or DD mandate, a new functionality has been introduced to perform the loan repayment by debiting the UNC balance and settling the outstanding bills.

A new local field has been created in the SETTLEMENT product condition as Loan Repayment from UNC Balance. This field enables the user to select an option based on which an amount will be debited from UNC to repay the outstanding loan.

The AULEND.SETTLE.ACCOUNT.REDRAW routine has been created and attached to the core settlement job. When the repayment from the settlement account is failed, the bills will be in due status.

Schedule Recalculation without Redraw Balance

One of the widely offered functions across banks in Australia for its customers is to have offset accounts and redraw functions for mortgage contracts. In Temenos Transact, it is the UNC balance that is used for the redraw function.

Any balance in UNC will be net with the loan outstanding (CURACCOUNT) for the purpose of principal interest calculation.

The UNC balance will not be net with outstanding balance for the purpose of payment amount (EMI amount) calculation.

This functionality allows banks, when it comes to schedule recalculation, to consider the UNC balance for the interest projections on P&I contracts as it is a balance type within the loan contract.

The AULEND.CALC.PAYMENT.AMOUNT routine has been introduced to calculate the Calc Amount in the Payment Schedule based on the CURACCOUNT (CUR) balance only .The interest calculation happens as per the core by considering the CURACCOUNT and UNC balance defined in the Ac Balance Type.

The AULEND.SCH.RECAL.DR.DAILY record has been created in the AA.SOURCE.CALC.TYPE application to attach the AULEND.CALC.PAYMENT.AMOUNT routine in the Calc Routine field.

Flexible Repayment Based on the Fixed Amount

Each of the auto repayment, during the creation, expose three different options of how the system calculates the amount, which will be credited to the loan as minimum amount, or minimum amount plus extra or fixed amount.

Depending on the amount option validated during the each repayment, the re-calculated will be made automatically by the system in case of the loan re-amortisation.

With this functionality banks will be able to:

• Create a request for the direct debit and setup flexible repayment amount through the direct debit.
• Set up an automatic repayment on the loan based on the customer request.
• Set up a flexible automatic repayment amount on the loan based on the customer request.

Multiple Loans and Package Pricing

Whenever a customer opens a fully featured home loan, an annual fee will be charged. The payment schedule can be defined to charge a fee based on the defined frequency.

If the customer has multiple fully featured home loans, then the loans will be packaged together, and one annual fee will be collected. The AULEND.PACKAGE.DETAILS application has been introduced to create, update and store the package details.

The loan disbursement can be performed during a loan creation as auto disbursement or as a separate disbursement activity. At the same time, the loan disbursement can be single or multiple disbursements.

This functionality allows banks to manage multiple fully featured loan accounts within one package and there must be one single annual fee for the package facility.

When a customer is changed, added or deleted or the customer role is changed, a new loan package will be created or added to the existing package.

Using this functionality, bank users will be able to view the details of a loan package for a customer or multiple customers. The AULEND.PACKAGE.DETAILS.LIST enquiry has been released to display all the loan packages and their related loan details for the customer or customers. Also, banks will be able to capture bills for a package fee when there is a customer change, customer role or product change in an already disbursed master loan.

Bank users will be able to change the product of a loan. When the product of the loan is changed to another product, a new loan package will be created or added to the existing package, or no package will be created.

Also, loans created with customers (A, B, C) and loans created with customer(C, A, B) will go under the same package.

Bank users will be able to close a master loan and the next loan in the package will be changed as a master loan in the package.

A loan can be cancelled before the full disbursement and based on which, the package details can be changed.

When a loan is split into a single loan or multiple loans, new loans will be created. Similarly, when multiple loans can be merged into single or multiple loans. In such scenarios, based on the loan availability in any package, a new package can be created or can be continued in the existing package.

A facility has been provided to allow users to change the master loan and waive package fee.

Using this functionality, banks are able to create and update parameters for the loan package facility based on the loan product and customer role using the AULEND.PACKAGE.PARAM,AULEND.API.LOANS.1.0.0 version released as part of this functionality. The loan package details for a customer can be retrieved using the AULEND.API.PACKAGE.DETAILS.LIST.1.0.0 enquiry. A master loan can be updated in a loan package as per the customer request using the AULEND.PACKAGE.DETAILS,AULEND.API.LOANS.1.0.0 version. Also, the waive package fee can be updated in a loan package using the AULEND.PACKAGE.DETAILS,AULEND.API.WAIVE.1.0.0 version.

When a loan is split into a single loan or multiple loans, new loans can be created in a different product. Similarly, multiple loans can be merged into single or multiple loans in a different product. In such scenarios, based on the loan availability in any package, a new package may be created or may be continued in the existing package.

Product Control Rules for Home Loans

In Australia banking practice, for home loan products, for a certain period, a fixed interest rate will be applied and post which it will be changed to a variable interest rate based on the certain criteria.

This functionality allows banks to apply the system control on the home loan product based on the interest rate type (fixed or variable), loan purpose and payment type (such as Constant or Interest Only).

Product control rules are based on the interest rate type: fixed or variable.

The product structure offers both fixed and variable rates. Based on the interest rate type, the product control rules must be checked by the system and there is no manual intervention by the back-office user.

The Loan Purpose field have been added to the ACCOUNT product condition to define the loan purpose.

An external property class has been created to define the required controls.

APIs for Product Controls

Using the AA.ARR.ACCOUNT,AULEND.API.LOANS.1.0.0, AA.ARR.INTEREST,AULEND.API.LOANS.1.0.0 and AA.ARR.TERM.AMOUNT,AULEND.API.LOANS.1.0.0 versions released as part of this functionality, bank users are able to create and update a home loan based on Loan Purpose, Interest type and Payment Type for the Australian region.

This functionality enables banks to create and amend home loans in the Australian region and retrieve the additional loan repayment details and the loan redraw balance details using the new versions and enquiries provided with APIs, for Integrated Loan Products.

The AA.ARR.ACCOUNT,AULEND.API.LOANS.2.0.0 version, exposed as an API, has been released as part of this functionality for Integrated Loan Products, to create a home loan by capturing Loan Purpose, Interest Payment Type and Interest Type applicable for the Australian region.

The AULEND.REPAYMENT.LIMITS.API.2.0.0 enquiry, exposed as an API, has been released as part of this functionality for Integrated Loan Products, to retrieve the maximum repayment limit that can be paid by the customer during the fixed or variable anniversary period, details of actual repaid amount and the remaining balance.

The LNRDRW.API.GET.LOANREDRAW.BALANCES.3.0.0 enquiry, exposed as an API, has been released as part of this functionality for Integrated Loan Products, to retrieve the loan redraw balances like currency, advance position, available amount, and so on.

Locking Redraw Credit via Direct Debit

A loan repayment can be performed from the external account through the Direct Debit mandate or through the Settlement Account in Temenos Transact. The Extra Amount will be collected along with the constant payment and the same will be credited to redraw balance after adjusting the outstanding payments.

This functionality is managed by the backend process and the user has no role.

When the Direct Debit (DD) is returned, the lending credit arrangement is automatically reversed and the locked amount in the work file can be deleted.

As per the Max Ret Period field from the DD.PARAMETER application, the DD can be validated for the processed DD items, and the locked amount from the work file can be deleted. In addition, the locked amount will be validated when the redraw balance it is withdrawn.

This functionality allows banks to create and amend direct debit returns or resubmit transactions, initiate and amend withdrawal of redraw amounts by operators or customers, and retrieve the balances for loan redraw using the new versions and enquiries provided with APIs, introduced as part of this functionality.

The following items have been introduced with this functionality:

• A routine has been introduced to lock the amount credited to the UNC while processing the loan repayment through the DD.DDI.
• A service has been created to unlock the UNC amount when the DD Item is processed and not returned.
• A routine has been introduced to unlock the UNC amount when the DD Item is processed and returned.
• The DD.RETURN,AULEND.API.1.0.0 version, provided with an API, is used to create or update direct debit returns or resubmit transactions and initiate auto repayment of loans.
• The PAYMENT.ORDER,LNRDRW.CUS.INITIATED.REDRAW.API.1.0.0 version, provided with an API, is used to initiate, amend and authorise payment orders assisted by the customer for withdrawal of redraw balance.
• The PAYMENT.ORDER,LNRDRW.OP.ASSISTED.REDRAW.API.1.0.0 version, provided with an API, is used to initiate, amend and authorise payment orders assisted by the operator for withdrawal of redraw balance.
• The LNRDRW.API.GET.LOANREDRAW.BALANCES.2.0.0 enquiry, provided with an API, is used to retrieve loan redraw balances like currency, advance position, available amount, and so on.

Flexible Loan Repayment Applicable only for PI Payment Type

The flexible repayments are only allowed when there is a minimum repayment amount. In Temenos Transact, this is defined as a Constant payment type. Only when there is a minimum repayment amount, customers can pay an extra amount or choose a fixed amount. For a loan with IO repayment type, the system will not allow the users to create a loan when an extra or fixed amount is provided. The same check will be done whenever the employee makes any variation request.

The following items have been introduced with this functionality:

• The AULEND.PACKAGE.PARAM,FLEXIREPAY.INPUT version allow users to configure the eligible product and the payment type and to apply for the Extra Amount or the Fixed Amount. The Id of the application will be the Lead Company Id.
• The Product Id for Flexible Repayment field indicates the lending product for which the flexible repayment with the extra amount or fixed amount is applicable. It contains the loan product Id only and will not be allowed to configure other than loan products.
• The Payment Type for Flexible Repayment field indicates the payment type applicable for the flexible repayment with the extra amount or fixed amount. This field the dropdown values from the AA.PAYMENT.TYPE which have the account property defined in the Mand Prop Class field.

New Fields in the External Property Class and Its Validations

The system has set the default correct interest rate keys based on the repayment types, the loan purpose owner occupied or investment, and the fixed or variable interest rate type.

If the user enters the forward dated condition and if Interest and payment schedule conditions are not linked, a validation is required. Only when both the conditions are linked, the system will allow user to commit the loan.

The below fields have been introduced in the XAU.LOAN.PRODUCT.CONTROLS external property class to capture the interest rate key and fixed interest rate.

• Periodic Interest Key: Indicates the periodic interest key which will be applied for the arrangement, will be checked with the St Periodic Index.
• Basic Interest Key: Indicates the periodic interest key which will be applied for the arrangement. To be vetted against Basic Rate Text.
• Fixed Rate: Indicates the fixed interest rate that will be applied for the arrangement. Free format field to define interest rate.

When the Fixed Interest Period/Interest Only Period is defined in months, then the respective interest condition needs to be defined only in years or months, otherwise, the system will display the error messages below.

• Fixed Interest Period defined as Months (M) then Interest condition should be defined only in Years or Months.
• Interest Only Period defined as Months (M) then Schedule condition should be defined only in Years or Months.

In the Payment schedule condition, when two different payment types are configured for the same Interest property, then the system will display the Cannot have more than one payment type for same interest property, create future dated condition error message.

The LENDING-CHANGE-TERM.INTEREST.SCHEDULE named activity has been introduced with the linked activity as LENDING-RENEGOTIATE-ARRANGEMENT, which allows the bank user to amend the details of all required properties that are needed to default the interest key. If the bank user wants to change any of the below, then the user must use this activity so that Interest and Schedule conditions can be changed at the same time.

• Loan purpose (Account property).
• Fixed/IO term (Term property).
• Interest type (Interest property.
• Payment type (Schedule property).

This functionality enables bank users to know when the period defined in the Fixed Interest Period is not aligned with the Interest condition, with Interest Type as Fixed when a new lending arrangement is created. Also, bank users will know when the period defined in the Interest Only Period is not aligned with the Payment Schedule condition, with Payment Type as Interest Only. Users will be able to change the Fixed Interest Period or Interest Only Period in the Term property, along with the Interest and Schedule conditions.

Using this functionality, banks are able to manage the sync of Interest and Payment Schedule conditions, to have the same date. When the date is not the same, the system will display an error message. Also, bank users can restrict the usage of the start and end date in the Schedule condition against the Interest property defined in the Ref Int Property of the XAU.LOAN.PRODUCT.CONTROLS property. The users will create future dated conditions only using the tab. If they are defining the different payment types in the same tab using the start and end dates, the system will display an error.

The interest key will default based on the loan purpose, interest type and payment type as defined in the external property class when an arrangement is created. When a current or future dated Payment Schedule condition is created without the property defined the Ref Int Property, the system will display the Property defined in REF.INT.PROPERY should be present error.

Also using this functionality, banks are able to create and amend the new control conditions based on the interest rate type (fixed or variable), loan purpose and payment type (such as constant or interest only) for home loan product and retrieve the details of control condition for home loan product through APIs.

The AA.PRD.DES.XAU.LOAN.PRODUCT.CONTROLS,AULEND.API.1.0.0 version provided with APIs has been introduced as part of this functionality to create and amend the new control conditions based on the interest rate type (fixed or variable), loan purpose and payment type (such as constant or interest only) for home loan product, and retrieve the details of control condition for home loan product.

The AULEND.LOAN.PRODUCT.CONTROLS.API.1.0.0 enquiry provided with API has been introduced as part of this functionality to retrieve the list of loan control conditions available for home loan product.

Using this functionality, users are able to automatically default the Interest key in the Interest arrangement condition of the loan from the external property class based on the Loan Purpose, Loan Interest Type and Loan Payment Type. Also, users will be able to select the Loan Payment Type attached to the Interest condition, while creating an arrangement.

Product Configurations

The following lending products are released as part of this functionality.

Data for Additional Repayments by the Customer During a Fixed Rate Period

Using this functionality, banks are able to store the details of amounts credited to the UNC balance (redraw balance) for each anniversary in the AULEND.EXCESS.REPAYMENT.DETAILS application. Whenever the excess repayment is credited to the UNC balance, this application will be updated with the details of transaction.

Customers can make up to $10,000 in additional repayments per fixed-term year. The fixed-term year starts when the fixed rate period began and renews on the same date each year. This functionality allows banks to keep track of the additional repayments per fixed-term year to advise customers on how much they can still pay.

The AULEND.ADDITIONAL.REPAYMENT enquiry has been introduced as part of this functionality, to provide the details of the extra repayments made by the customer during the fixed and variable anniversary period.

Also, this functionality enables banks to display the maximum repayment limit that can be paid by the customer during the fixed or variable anniversary period, details of actual repaid amount and the remaining balance using the AULEND.REPAYMENT.LIMITS.API.1.0.0 enquiry provided with an API.

The Currency and Customer Name fields have been added to the AULEND.ADDITIONAL.REPAYMENT enquiry to display the currency and the customer's name of the arrangement, when this one belongs to multiple customers.

This functionality allows banks to view the maximum excess repayment amount only for the current interest type as on the date of enquiry, while for the other interest type will be null, when there is Fixed and Variable interest in an anniversary. The additional repayment amount payable will be displayed for total only. Also, this functionality allows banks to view the arrangement Id, account Id and currency of the customer for which the details of the extra repayments made during the fixed and variable anniversary period. New fields have been added to the AULEND.ADDITIONAL.REPAYMENT and LNRDRW.REDRAW.BALANCE.DETAILS enquiries.

Adhoc Activity Charges Settled through Direct Debits

Banks offer loans as part of their product mix, and to settle activity charges, repayments are required to be made through Direct Debit (DD) just like scheduled instalments. The process of setting up and processing such repayments needs to be seamless and automatic, without requiring any manual intervention.

This functionality enables banks to manage the repayments done for adhoc activity charges settled by DD like the scheduled instalments through a seamless process.

A new field, DD Param For Adhoc Charges, has been added to the AULEND.PACKAGE.PARAM application, to configure the DD Parameter Id. This field specifies the parameter to which the mandate is linked, along with all associated details, which are used during mandate processing.

New configuration records have been created to enable the settling of the adhoc activity charges through an automatic and seamless process.

This functionality allows banks to perform the reversal of activities-based charges and the deferred collection of charges. Also, this functionality enables banks to create, update and view the AULEND.PACKAGE.PARAM parameters record using the AULEND.PACKAGE.PARAM,AULEND.API.LOAN.PACKAGE.2.0.0 version provided with APIs.

Charge Missed Payment Fee for Failed Loan Repayments

This functionality allows banks to charge the missed payment fee once in every 4 weeks irrespective of the repayment frequency so that the customers aren't charged a fee after every missed repayment.

The threshold amount (of $30), fee amount (of $30) and the grace period (of 10 days) will be configurable. The repayment frequencies followed are weekly, bi-weekly and monthly.

The following items have been released as part of this functionality:

• The AULEND.PACKAGE.PARAM,DEFAULTFEE.INPUT version and AULEND.PACKAGE.PARAM,AULEND.API.CREATE.PARAM.3.0.0 API have been created to capture the threshold amount for charging the missed payment fee.
• A new AA.PROPERTY record has been released for the missed payment fee which is to be attached to the Loan Product in the AA.PRODUCT.DESIGNER application and also to configure the Activity Charges condition.

Also, bank users will be able to validate the outstanding amount and last charge date to apply the default fee. The system will charge the default fee for the first time by checking the threshold amount only and the recurrence default fee by checking if the last charged date is greater than the threshold frequency.