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AUTO RATE CHANGE

​Function
Once a Loan Master file and Loan Activity has been recorded for a loan, altering that loan’s interest rate involves three steps:

Processing a zero repayment to accrue interest at the old rate.

Editing the Loan Master with the new interest rate.

Calculating a revised payment amount and editing the Loan Master to reflect this revised rate.

Auto Rate Change will process these three steps automatically. 


Operating Instructions
From the GMS-RLSS Main Menu, select Features, Auto Rate Change.  

The program allows rate changes to be processed for:

• All loans within the portfolio; 
• Loans with an Optional Field titled “Rate Change” and containing Yes within that field; 
• Specific loans selected one by one. 

If you plan to use option 2, an Optional Master Field must first be established with the title “Rate Change” and data type “text”.  That field within the Loan Master file must be completed with the word Yes in order for the rate change to be applied to the loan. 

Does the rate change apply to all loans within the database?
Click on the appropriate response:  “Yes” or “No”.  

If “Yes” is selected, the cursor will move forward to the effective date.

If “No” is selected, you will be asked the next question.

Have you established an optional field ….. ? 
Click on the appropriate response:  “Yes” or “No”.  

If “Yes” is selected, a combo box will appear requesting selection of the Optional Field to be searched for the “yes” response.  Click on the appropriate field and tap enter to select. 

If “No” is selected, from the combo box you will select the loans the rate change will affect.  You may select  only one loan, or any number of loans.  Selection is made by holding down the Ctrl key and clicking on the desired loan number.  Removing a selected loan is also accomplished by holding down the Ctrl key and clicking on the loan number.  You may also hold down the Ctrl key and “click and drag” to select a range of loan numbers. 

What is the effective date of the rate change?
The field will default to “today’s date”, but the calendar may be used to select a different date.  

This date may not be retroactive and if you enter a date prior to “today’s date”, you will receive a message that the rate change cannot be processed. 

The date may be edited to a future date, but should only be done if all activity prior to the date as entered has been recorded.  If the date is edited to a future date, you will receive a message asking if all activity prior to this date has been posted. 

Is the adjustment a rate increase or decrease?
Select the appropriate response by clicking on the circle prior to the words “increase” or “decrease”.

What amount is the rate change? 
Please enter the change as a decimal (ex: changing from 2.50 to 2.75 would be entered as .25). 

Enter the amount of the change as a decimal point.  For example, a change of one-quarter percent is entered as .25.

Process Buttons

Verify Changes         
This button must be selected prior to posting the rate change.  Review the on-screen report very carefully for accuracy.  It is strongly advised the report be printed and the hard copy be retained as documentation of the rate changes processed. 

Post                            
Until Verify Changes has been selected, this option is not available.  Once you are certain the appropriate loans will be affected by carefully viewing the report generated by “Verify Changes”, select Post to process the rate changes. 

Things You Should Know

• If the Auto Rate Change feature is not available on your Features menu, check Features/Supplement Security on the Tools menu to make certain you have rights to access this item. 
• This feature should be used very cautiously.  If used correctly, it can be a helpful tool that saves staff time.  If used incorrectly, it can create inaccurate Loan Master files and record inappropriate Loan Activity, both requiring staff time to make corrections. 
• Rate changes cannot be processed with dates prior to “today’s date”.  This is a safeguard built into the program to prohibit rates being changed retroactively.  If, for example, you record an activity dated 04/02/09, and then attempt to process a rate change for the same loan effective 04/01/09, the program will be unable to accurately accrue interest through the automatic Loan Activity process. 
• Rate changes may be processed with future dates, but again, caution is advised.  If processing with a future date, it is very important all activity prior to the future date has been recorded.  This is difficult to accomplish since you cannot accurately predict no payments will be received between today’s date and the future date of the rate change.  If you do process the rate change with a future date, and then a payment or disbursement is recorded prior to that date, automatic interest calculations with Loan Activity will be incorrect.  You will need to manually calculate the interest and enter as an adjusting entry. 
• If a selected loan has a recorded activity containing an activity date beyond the rate change date, it will be excluded from the processing.  When Verify Changes is selected, the loan will be listed separately with a notation that it will not be processed. 
• The zero Loan Activity processed by the program is intended to accrue interest due on the loan balance at the old rate.  Once the rate is changed, interest calculations will be based on the revised rate. 
• When the Loan Master file is automatically edited with a new payment amount, that new payment amount is calculated by utilizing the loan balance as of the date of the rate change, the revised interest rate, and the Maturity Date within the Loan Master file.  An internal amortization schedule uses these three pieces of data to determine the payment amount that will be required to repay the loan in full by the Maturity Date.  For this reason, be certain the Maturity Date within any loans to be affected by the rate change is accurate prior to using Auto Rate Change. 
• Interest rates are determined by formal loan documents, either those signed at the closing or addendums to the originals.  It is advised you check with your auditor or legal counsel prior to altering interest rates to ensure there are valid documents in place.