Select Method CPI RSC Fin RSC Schd RSC Verif DEF Fin DEF Schd CPI Rpt RSC Rpt

Payment Reschedule [U0104]

Contents

• Payment Reschedule Screens
  • Payment Reschedule Selection
  • Adjustment Method, Processing Month
  • CPI - Verification
  • RSC - Financial, Asset
  • RSC - Payment Schedule
  • RSC - Verification
  • DEF - Financial, Asset
  • DEF - Payment Schedule
    
    
• CPI - Payment Reschedule Exception Report
• RSC - Payment Reschedule Audit Report

 

Introduction

The Payment Reschedule update allows mid-term changes to financial information (e.g., payment schedule, security deposit) of precomputed interest type leases, operating leases, and interest bearing loans. For precomputed leases and interest bearing loans of P&I (principal and interest) type, the yield to maturity is automatically recalculated based on the changes made in this update.

Payment Reschedule cannot be applied to a non-accrual lease.

There are four methods of mid-term changes:

• Individually, lease-by-lease (RSC).
• Mass changes based on the user’s selection criteria (CPI). Mass changes are for precomputed leases only.
• Deferred payment reschedule (DEF).
• Deferral reversal (DEFR).
• RE-Write payment reschedules (RWT).

When making individual adjustments, the following financial information may be changed:

• Security deposit
• Book initial direct cost (IDC)
• Insurance premium
• Residual (for each asset of precomputed leases)
• Remaining term (indirectly via payment schedules)
• Estimated remaining term (for month-to-month leases)
• Remaining payment schedule (number, frequency and amount of payments)

When adjusting multiple leases, only the remaining payment schedule may be adjusted. Using the float index assigned to the lease and the current floating rates (as stored through the Base Rates update [U0705]), an additional charge is computed and added to each payment remaining. This option may be used if the lease agreement has a built-in payment adjustment (e.g., based upon the Consumer Price Index).

If a payment reschedule is to adjust payments already accrued, use the Accrual Reversal option of the Cycle Accruals update [U0301] to reverse accruals, before making the adjustment through the Payment Reschedule update [U0104]. In this case, only the RSC adjustment method may be used.

If a payment reschedule involves a lease on which a principal paydown was made, the paydown amount must be considered in determining new payment amounts.

If the lease accrual method is of a precomputed type, and the Payment Reschedule update is used to reduce (write down) the Residual of the lease, a special calculation will be used to recognize a portion of the write down as a loss while maintaining the yield (APR) over the remaining term of the lease.

The method used for residual write down affects the same G/L accounts for all the finance lease precomputed accrual methods. The G/L transaction will be:

 

General Ledger Account	Amount
DR Loss on Sale	Present Value of the Residual Write Down
CR Unguaranteed residual
DR Unearned Income	Balance of Residual Write Down
CR Unguaranteed residual

 

The PV (present value) of the residual write down is also the change in accrued principal. The balance of the residual write down will be the remaining difference between the amount of the residual to the write down less the present value of the residual.

For example, if a lease has a 12% yield for 12 months and a $20,000 residual being written down to $15,000, with 9 months remaining on the lease, the PV of the residual is (using an HP12c with the PV calculation):

5,000 FV <== Future Value
12 g i <== Enter Interest Rate (Yield) @ 1.0% per month (12% per annum)
9 n <== (Remaining) Term
PV <== Present Value
4571.70 <== Result
5,000 - 4,571.70= 428.30

The journal entry for this write down would be:

 

General Ledger Account	Amount
DR Loss on Sale	$4571.70
CR Unguaranteed residual
DR Unearned Income	$428.30
CR Unguaranteed residual

The accrued principal will also be reduced by the PV, or $4571.70. The yield will remain the same. For non-monthly leases, the write-down can only be processed on an accrual month.

There will be a difference in the yield after the residual write-down, but in most cases it will be less than a basis point (one hundredth of a percent .0001). However, if the lease accrual method is not AAPR or RAPR, then a residual write down will result in a change to the yield that exceeds the expected “.0001%” (+ or -). Other precomputed methods such as Rule of 78 and Straight line do not earn income using level yield (APR) method. Therefore, the yield shown for these other precomputed accrual methods is informational only and is not used to calculate the monthly income amounts.

When the Cash Control module is purchased and a Payment Reschedule is made to the lease, LeasePak will automatically assign a trace reference information when a security deposit is received from the Payment Origination code. The trace reference will appear in the Cash Control Payment History [R0926] report.

When a Suspense item has been tied to the lease that is being rescheduled, LeasePak will automatically default the trace reference information to the Suspense Review [R0203] report.

 

Payment Reschedule Selection

This screen is used to specify lease(s) to be rescheduled.

A specific lease number must be entered for adjustments to an individual lease.

A float rate adjustment may be made to all leases, a selection of leases (such as all leases for portfolio 1), or an individual lease. Before using the float rate adjustment, a float index must be assigned to each lease through the Book Lease option of the New Lease update [U0101] or through the Master Financial update [U0202], and float indices must be established through the Base Rates update [U0705].

If the Notes Payable module is purchased and if an active note is attached to the lease, a warning message will be displayed.

Field Descriptions

• ALL
  Enter X to select all leases for a float rate adjustment. Leave blank to enter a selection of leases or a specific lease number.
  
  
• PORT
  Enter the number of the portfolio for a float rate adjustment. Leave blank if adjusting all leases or entering a specific lease number.
  
  
• COMP
  Enter the number of the company for a float rate adjustment. Leave blank if adjusting across companies or entering a specific lease number.
  
  
• REGN
  Enter the number of the region for a float rate adjustment. Leave blank if adjusting across regions or entering a specific lease number.
  
  
• OFFIC
  Enter the number of the office for a float rate adjustment. Leave blank if adjusting across offices or entering a specific lease number.
  
  
• LEASE
  Enter the lease number. Leave blank if adjusting multiple leases for float rate.

 

Adjustment Method, Processing Month

This screen is used to select the adjustment method and, if required, the processing month. PROCESSING MONTH is necessary only for the CPI ADJUSTMENT METHOD.

Field Descriptions

• ADJUSTMENT METHOD
  These are the valid methods:
  
  
  • RSC Allows changes to security deposit, book initial direct cost, insurance premium, residual (precomputed leases only), and the remaining portion of the payment schedule. PROCESSING MONTH is not accessible.
    
    Additionally, this adjustment method calculates the Turn-In Date for the lease +1 day after the Maturity Date.
    
    
  • CPI Used when the payment amounts for the remainder of the payment schedule are adjusted by adding an amount that depends on a float rate index, such as the consumer price index. Use this method to make an annual lease anniversary adjustment to a lease or group of leases.
    Leases to be adjusted must meet 3 criteria:
    
    

  1) Lessor accrual method must be one of the precomputed methods.
  2) Lease must have a FLOAT INDEX code. (Refer to Book Lease update [U0101] for coding.)
  3) Month portion of LEASE DATE must match month portion of PROCESSING DATE

  Adjustments are calculated as follows:
  
  First, LeasePak calculates the average base rate during the processing month entered for the financial institution coded as the lease’s float index.
  
  Next, LeasePak multiplies future payment amounts for the lease by that average percentage to get an additional amount.
  
  Finally, LeasePak adds the calculated amount to each future payment.
  
  For example, if 09/95 is entered as the PROCESSING MONTH, all leases with a LEASE DATE in September of any year before and including 1995 have their future payment amounts adjusted upward. If such a lease’s FLOAT INDEX is coded 2, and 2 represents Morgan Prime, then that lease’s rents will be adjusted by the average float rates in September 1995 for Morgan Bank.

  • DEF Deferrals are used when the lease will go through the extension/deferment criteria eligibility. LeasePak will prompt the user to enter both a non-zero number of months to defer and a valid month to start the deferment from. If the last accrued to date is later than the processing month an accrual reversal from the last accrued to date month will be made. It will automatically insert a SKIP for every month deferred and by default move the deferred monthly payment into a balloon payment on the final payment due date.
    
    
  • DEFR Deferral Reversals may be performed when the following criteria is met:
    
    

  1) The last payment reschedule performed on the lease (the current payment schedule is different from the one right after the last deferred payment reschedule).
  2) There are no partial or full payments applied to the invoice on or after the deferral month or the accrual to date, whichever is earliest.
  3) If the deferral is for a Security Deposit or Deferment Fee.
  
  If Security Deposit or Deferral Fees are invoiced the following rules are applied:
  
  1) If fees have not been fully or partially paid through Payment [U0102], Batch Payments [U0305] or Cash Control [U0126], and the fee amounts have not been changed through Assessments [U0105], then no further processes need to be made.
  2) If the fees have been fully or partially applied via the above named updates, the Payment Reversal must be made to reverse the payment.
  3) If the fee amount has been changed through Assessments [U0105], the fee amount must be changed back to the original value. An error message will appear displaying the Original Fee amount.

• RWT Rewrite allows changes to security deposit, book initial direct cost, insurance premium, residual (precomputed leases only), and the remaining portion of the payment schedule, the date of the last rewrite and the number of rewrites will be stored.
  
  Additionally, this adjustment method calculates the Turn-In Date for the lease +1 day after the Maturity Date.
  
  
  
• PROCESSING MONTH (MM/YY)
  This field is accessible only if the CPI ADJUSTMENT METHOD is entered. This date has two effects:
  
  
  • Only leases within the selection criteria whose LEASE DATE month is the same as the month entered here are adjusted
  • The percentage used in calculating the float rate adjustment is the average rate for the PROCESSING MONTH.

 

CPI - Verification

This screen is used to verify the CPI adjustment to be performed. The adjustment percentage displayed is the percentage for the first lease in the selection. If other leases in the selection have a different FLOAT INDEX the adjustment percentage used may be different than the one displayed here.

If the ADJUSTMENT METHOD is CPI, this is the last screen to be displayed. An audit report is generated detailing any leases whose payment reschedule for method CPI is not successful.

Field Descriptions

• ADJUST PAYMENT SCHEDULE(S) (Y/N)?
  If Y is entered, the selected leases are adjusted when RETURN is pressed.

 

RSC - Financial, Asset

This screen appears only if the ADJUSTMENT METHOD is RSC. It is used to change relevant financial data for the asset and/or lease. The existing security deposit, book IDC, asset number(s), asset cost(s), and asset residual value(s) for the lease are displayed.

The asset information is not displayed for operating leases.

Field Descriptions

• SECURITY DEPOSIT
  Change the security deposit for the lease, if desired.
  
  If the lease is subject to advanced invoicing, any increase in security deposit must have already been received. LeasePak will not bill additional security deposit in these cases.
  
  
• CASH RECEIVED (Y/N)?
  This field appears only if the amount of the SECURITY DEPOSIT is increased. Enter Y if the additional deposit has been received.
  
  
• CASH TO BE DISBURSED (Y/N)?
  This field appears only if the amount of the SECURITY DEPOSIT is decreased. Enter Y if the decrease is to be disbursed.
  
  
• INITIAL DIRECT COST
  This is the Book IDC calculated by LeasePak. Increase it, if desired. INITIAL DIRECT COST may not be decreased.
  
  Note: Neither Notary Fee (IDC2) nor IDR fields (Registration Fee, Vendor Subsidy, Opening Commission, Insurance Fee) can be adjusted on this screen.
  
  
• BANK CODE
  This field will appear if the Multiple Banks module has been purchased. It allows the user to specify which bank received or disbursed the cash. The default bank code is 125; valid entries are 1 or 125-144. The user may only modify this field if CASH RECEIVED or CASH TO BE DISBURSED is Y.
  
  
• PAYDOWN
  This amount is used to pay down a portion of the outstanding principal of a precomputed lease. The PAYDOWN amount field will only be accessible for an RSC payment adjustment method. The paydown amount should not exceed the outstanding principal of the lease. The new contract receivable and the lessor unearned income will be adjusted by the paydown amount, which will be reflected in the following two G/L transactions.

General Ledger Account	Amount
DR Cash	PAYDOWN
CR Contract Receivable
DR Contract Receivable	NEW CONTRACT RECEIVABLE -ORIGINAL CONTRACT RECEIVABLE + PAYDOWN
CR Unearned Income

Note: A paydown is not allowed for RES method extended leases on a cash or accrual basis as these types of leases do not have contract receivable.

• ADDITIONAL INSURANCE PREMIUM
  Increase the Insurance Premium (IDC2) paid, if desired. The premium may not be decreased.
  
  
• ASSET
  The number of each asset on the lease is displayed.
  
  Not applicable to operating leases.
  
  
• COST
  The acquisition cost of each asset on the lease is displayed. Total acquisition cost for all assets is on the total line.
  
  Not applicable to operating leases.
  
  
• RESIDUAL
  The current residual of each asset of the lease is displayed. Total residual for all assets is on the total line.
  
  Not applicable to operating leases or interest bearing loans.
  
  
• NEW RESIDUAL (scrolled area)
  Change the residual value of any or all assets on the lease, if desired. Not applicable to operating leases or interest bearing loans.

 

RSC - Payment Schedule

This screen appears only if the ADJUSTMENT METHOD is RSC. It is used to change payment schedule data for the remaining life of a lease.

Asset information is not displayed for operating leases.

Field Descriptions

• REMAINING TERM
  The remaining term of the lease is displayed.
  
  If the lease is a month-to-month lease, EST. REMAINING TERM is displayed in lieu of REMAINING TERM. The estimated remaining term is used to calculate the new monthly IDC allocation:

  UNAMORTIZED IDC
  / ESTIMATE REMAINING TERM

• REMAINING PAYMENT SCHEDULE
  The remaining portion of the payment schedule is displayed. The starting and ending payment numbers for each line of the payment schedule are displayed.
  If advanced invoices have been produced and are not yet accrued, they are ignored. Replacements for such advanced invoices will be created the first time accruals are run after the payment reschedule is processed.
  
  
• NUMBER (scrolled area)
  Change the number of payments, if desired. The remaining term of the lease may be changed by changing the number of payments remaining. The term may be lengthened or shortened.
  
  If the lease is a fixed term lease with an automatic conversion to month-to-month, the NUMBER of the last payment schedule must be 999.
  
  
• FREQUENCY (scrolled area)
  Change the frequency of the payments, if desired. The remaining term of the lease may be changed by changing the frequency of the payments remaining. The term may be lengthened or shortened.
  Valid payment frequencies are:

  MON Payments are due monthly (12 payments per year).
  QTR Payments are due quarterly (4 payments per year).
  SEMI Payments are due semiannually (2 payments per year).
  ANNL Payments are due annually (1 payment per year).
  SKIP Payment(s) are not due for the month. A payment amount may not be entered with the SKIP frequency code. Example:
  
  PAYMENT SCHEDULE NUMBER FREQUENCY AMOUNT
  6 - 9 9 MON 100.00
  10 - 12 3 SKIP 0.00
  13 - 21 9 MON 100.00
  22 - 24 3 SKIP 0.00

  All advance payment frequencies (ADVM, ADVQ, ADVS, ADVA) are invalid on reschedules.

  Note: Prior to 2.2a, LeasePak would only calculate the percent of schedule based on the weighted share of total acquisition cost on all assets. Now LeasePak allows for an alternate calculation for percent of schedule based on the weighted share of the total payment amount. See EBV Payoff Method in the Calculations Document of the Reference Guide as well as the Miscellaneous Customizations option of the Custom General update [U0712].

• AMOUNT (scrolled area)
  Change the amount of the payment, if desired. Do not include use tax in the payment amount, as LeasePak automatically calculates and assesses it.
  The total amount of advance payments shown may not be changed.
  
  For interest bearing loans of P+I (principal plus interest) type, the total remaining payment amount must equal the remaining principal balance within tolerance levels. (Refer to the TOLERANCE parameter on the second screen of the New Lease Customizations option of the Portfolio update [U0212]).
  For interest bearing loans of P&I (principal and interest) type, the total remaining payment amount must be greater than the remaining principal balance.

 

RSC - Verification

This screen is used to verify the intended modifications to payment schedule and appears only if the ADJUSTMENT METHOD is RSC. Asset information is not displayed for operating leases

Auto Lease Extension: If the lease term is modified, i.e., the lease maturity date is changed, the automatic lease extension record’s extension start date will be adjusted accordingly. If the lease is changed to month-to-month, the auto lease extension record will be removed. If there is an error removing the auto lease extension record, LeasePak will provide a warning message: MTM lease. Use [U0108] to delete auto lease extension record.
If the lease maturity date is changed, and the auto lease extension record contains Recurring Charge information, LeasePak will provide a warning message: Warning: Use [U0108] to change auto lease extension RCR dates.

 

DEF - Financial, Asset

This screen appears when the DEF adjustment method is selected for the Payment Reschedule. When a DEF is made, LeasePak will perform edit checks based on the Ext/Def eligibility criteria set in the Miscellaneous Customizations of the Portfolio [U0212] update.

Field Description

• IDC AMOUNT
  The total IDC amount for the lease is displayed.
  
  
• ADD INS PREM
  The insurance premium for the lease is displayed or may be added.
  
  
• PAYDOWN AMOUNT
  Enter the paydown amount for the lease
  
  
• SEC DEP
  Enter the security deposit, if any for the lease.
  
  
• CASH RECD
  Enter Y or N for security deposit cash received.
  
  
• SEC CHECK NUMBER
  Enter the check number for the security deposit. This field will display if the Security Deposit field has been populated.
  
  
• DEF FEE
  Enter the deferment fee for the payment reschedule.
  
  
• DEF CASH RECD
  Enter Y or N for deferment fee received.
  
  
• DEF CHK
  Enter the check number for the deferment fee received.
  
  
• BANK
  Enter the default bank number for the lease.
  
  
• ASSET
  The asset number for the lease displayed.
  
  
• COST
  The total asset cost is displayed.
  
  
• RESIDUAL
  The residual amount for the asset is displayed.
  
  
• NEW RESIDUAL
  Enter the new residual amount for the asset.

 

DEF - Payment Schedule

This screen displays the remaining term and the new payment schedule including the SKIP payments for the lease.

 

CPI - Payment Reschedule Exception Report

The Payment Reschedule Exception report [U0104A] provides the following information for each lease whose attempted CPI method payment reschedule was unsuccessful.

• PORTFOLIO/COMPANY/REGION/OFFICE
  The P/C/R/O is displayed.
  
  
• LEASE
  The lease number is displayed.
  
  
• EXCEPTION MESSAGE
  Possible error messages in alphabetical order and their meanings are:
  
  
• FINANCIAL INSTITUTION DOES NOT EXIST
  The Financial Institution record does not exist on the Names (DRNM) file. Add the financial institution through the Financial Institution Name update [U0708].
  
  
• FLOAT RATES RECORD DOES NOT EXIST
  Float rates record does not exist on the Daily Base Rates (DRPR) file. Add the base rates through the Base Rates update [U0705].
  
  
• FAILED TO UPDATE FILES
  File updating could not be completed. This message indicates a data error. Notify your customer support representative at MSI.
  
  
• LEASE ACCRUAL METHOD MUST BE PRECOMPUTED
  Lessor accrual method is not precomputed and lease cannot be adjusted. Verify that this is the correct lease to be processed. If this is the correct lease, change the lessor accrual method to be a precomputed type using the Rebook update [U0116].
  
  
• LEASE HAS VENDOR PARTICIPATION
  Lease contains vendor participation and cannot be adjusted. Verify that this is the correct lease to be processed. If this is the correct lease, rebook it without vendor participation using the Rebook update [U0116].
  
  
• LEASE HAS INVESTOR PARTICIPATION
  Lease contains investor participation and cannot be adjusted. Verify that this is the correct lease to be processed. If this is the correct leas, rebook it without investor participation using the Rebook update [U0116].
  
  
• LEASE IS AT THE MAXIMUM PAYMENT SCHEDULE
  The lease is currently using all 360 payment schedule positions. No additional payment schedule entry may be made. Notify your customer support representative at MSI.
  
  
• LEASE IS OUTSIDE PAYMENT SCHEDULE
  The number of payments accrued does not match the lease’s payment schedule. This message indicates a data error. Notify your customer support representative at MSI.
  
  
• LEASE MUST BE ACTIVE
  Lease is not active (i.e., is paid off or charged off). Verify that this is the correct lease to be processed. If this is the correct lease to be processed, reverse the payoff using the Payoff Reversal option of the Payoff update [U0103] to return the lease to its status prior to the payoff.
  
  
• LEASE: XXXX IS LOCKED
  Where ‘xxxx’ is the lease number. The Lease record on the Lease (DRLS) file is locked. Try executing the Payment Reschedule update [U0104] again.
  
  
• NO EXCEPTIONS FOUND
  No errors were detected. All updating completed successfully.
  
  
• PORTFOLIO: XXXX DOES NOT EXIST
  Where ‘xxxx’ is the portfolio number. The portfolio record on the Portfolio (DRAP) file does not exist. This message indicates a data error. Notify your customer support representative at MSI.
  
  
• PORTFOLIO: XXXX IS LOCKED
  Where ‘xxxx’ is the portfolio number. The portfolio record on the Portfolio (DRAP) file is locked. Try executing the Payment Reschedule update [U0104] again.
  
  
• PORTFOLIO: XXXX NEXT READ 1 FAILED
  Where ‘xxxx’ is the last portfolio number read. This message indicates a data error. Notify your customer support representative at MSI.
  
  
• PORTFOLIO: XXXX NEXT READ 2 FAILED
  Where ‘xxxx’ is the last portfolio number read. This message indicates a data error. Notify your customer support representative at MSI.
  
  
• YIELD COULD NOT BE CALCULATED
  A yield could not be calculated with the adjusted financial information. This message indicates a data error. Notify your customer support representative at MSI.

 

RSC - Payment Reschedule Audit Report

The Payment Reschedule Audit report [U0104B] provides the following information for each lease whose payment schedule is changed using the RSC ADJUSTMENT METHOD.

For detailed information on the data shown on the report, refer to their field descriptions on the previous Payment Reschedule update screens.

 

LeasePak  Reference Guide

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