HELOCs that Shift from DSI to Arrears Calculation when Loan Transitions from the Draw Period to the Repay Period
The calculation used with HELOCs in Servicing Director bills for actual accrued interest. As a result, servicers with loans that transition from DSI to arrears will find that they can potentially end up with a period of unbilled interest equal to the number of Billing Lead Days they ascribe to a loan. One of our customers has suggested the following workaround (consult with your institution before using any workaround):
- Generate the final full DSI bill for the second to the last billing cycle before the draw expiration date.
- Immediately following bill generation, change the Billing Lead Days value to zero.
- Generate the final DSI bill for the last billing cycle on the bill’s due date, which will include the full cycle’s interest plus the accrual for the additional “unbilled” days.
- Immediately following bill generation, change the Accrual Status to Non-Accrue, to prevent further interest from being added to the Accrual Balance.
- When the payment is received, post it to all interest due in the accrual balance as captured in the last bill.
- After posting the payment, change the Interest Method from DSI to arrears.
ArticleNumber:
000053648