Loan Classification

Payment protection products (such as the various credit insurances and debt cancellation plans) are most often defined and calculated for various regular loan repayment schedules. As an example, single premium credit life insurance usually defines one formula for computing the premium on equal payment loans, whereas a different formula is used for balloon loans and single payment notes. It is very common for a product to be allowed on a given regular loan type, but not to be allowed for another.

Since the Loan Builder module allows the calling application complete flexibility when requesting a loan, when protection is requested with a loan, the SCE must analyze the loan to determine what type of loan it is categorized as for the purposes of computing protection.

What follows is a discussion of all loan classifications recognized by the loan builder module, and the requirements that must be met for the SCE to classify a specified loan as such.

Equal Payment Loan

To be classified as an equal payment loan, the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to CalcPmt with a Term > 1, no <Construction> element, and no EarlyPayoffDate attribute.

Example: An equal payment loan with 120 payments.

<inLOAN_BUILDER>
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="CalcPmt" Term="120" />
</inLOAN_BUILDER>

Single Payment Note

To be classified as a single payment note, all of the conditions specified for equal payment loan classification hold, with the exception that the <PmtStream> element must have the Term attribute set to a value of 1.

Example: A loan with a single payment.

<inLOAN_BUILDER>
  <EditInterest Date="2017-10-01" IntRate="7.5" AccrualCode="310" />
  <Advance Date="2017-10-01" Amount="50000.00" />
  <PmtStream Begin="2017-12-31" PmtType="CalcPmt" Term="1" />
</inLOAN_BUILDER>

Balloon Loan with a Specified Amortization Term

To be classified as a balloon payment loan (computed via a specified amortization term), the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to CalcPmt and a Term > 1, no <Construction> element, and one EarlyPayoffDate attribute set to the payment number on which the loan will be terminated.

Example: A 60 payment balloon loan with regular payments computed based upon a 120 month amortization term.

<inLOAN_BUILDER>
  <EditOutput EarlyPayoffDate="0060-00-00" />
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="CalcPmt" Term="120" />
</inLOAN_BUILDER>

Balloon Loan with a Specified Regular Payment

To be classified as a balloon payment loan (computed via a specified regular payment), the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with PmtType attribute set to FixedPmt and Term > 1, an optional second <PmtStream> element with PmtType attribute set to CalcPmt and Begin set to a value formatted as NNNN-00-00 (where NNNN is the value of Term in the first <PmtStream> element), no <Construction> element, and no EarlyPayoffDate attribute. Note that the calling application does not need to specify a replacement payment type of CalcPmt, as the SCE will automatically adjust the final payment to generate a final payment which amortizes the loan.

Example: 119 specified regular payments of $500, with a computed final balloon payment.

<inLOAN_BUILDER>
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="FixedPmt" Amount="500.00" Term="120" />
  <PmtStream Begin="0120-00-00" PmtType="CalcPmt" />
</inLOAN_BUILDER>

Balloon Loan with a Specified Final Payment

To be classified as a balloon payment loan (computed via a specified final payment), the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to CalcPmt and Term > 1, and a second <PmtStream> element set up as a replacement payment specifying the final payment number with PmtType attribute set to FixedPmt, no <Construction> element, and no EarlyPayoffDate attribute.

Example: 119 computed regular payments with a specified final balloon payment of $10,000.

<inLOAN_BUILDER>
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="CalcPmt" Term="120" />
  <PmtStream Begin="0120-00-00" PmtType="FixedPmt" Amount="10000.00" Term="1" />
</inLOAN_BUILDER>

Interest Only Loan

To be classified as an interest only loan, the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to PayInt and Amount attribute set to 0 and Term > 1, no <Construction> element, and no EarlyPayoffDate attribute. Note that the calling application does not need to specify a replacement payment type of CalcPmt, as the SCE will automatically adjust the final payment to generate a final payment which amortizes the loan.

Example: 119 interest only payments, with a final balloon.

<inLOAN_BUILDER>
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="PayInt" Amount="0.00" Term="120" />
</inLOAN_BUILDER>

Fixed Principal Plus Interest Loan

To be classified as a fixed principal plus interest loan, the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to PayInt and Amount attribute > 0 and Term > 1, no <Construction> element, and no EarlyPayoffDate attribute. Note that the calling application does not need to specify a replacement payment type of CalcPmt, as the SCE will automatically adjust the final payment to generate a final payment which amortizes the loan.

Example: 119 fixed principal payments of $250, with a final balloon.

<inLOAN_BUILDER>
  <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
  <Advance Date="2017-06-12" Amount="50000.00" />
  <PmtStream Begin="2017-07-12" PmtType="PayInt" Amount="250.00" Term="120" />
</inLOAN_BUILDER>

Skipped / Irregular Payment Loan

To be classified as a skipped and/or irregular payment loan, the requested loan must have one <Advance> element, one <EditInterest> element, one <PmtStream> element with a PmtType attribute set to CalcPmt and Term > 1, additional replace payment streams which produce skipped and/or irregular payments, no <Construction> element, and no EarlyPayoffDate attribute.

Example: Equal payment loan with all December payments skipped.

<inLOAN_BUILDER>
 <EditInterest Date="2017-06-12" IntRate="5.15" AccrualCode="304" />
 <Advance Date="2017-06-12" Amount="50000.00" />
 <PmtStream Begin="2017-07-12" PmtType="CalcPmt" Term="120" />
 <PmtStream Begin="0000-12-00" PmtType="FixedPmt" Amount="0" />
</inLOAN_BUILDER>

Highly Irregular Loan

A loan builder loan is classified as highly irregular if it does not fall in one of the above classifications.