Interest Expense Definition

Interest Expense Definition

In a pool, two things cause interest expense. The first is interest on curtailments, this is due to a timing issue, and the fact that the curtailment is, in effect, passed through the investor a month later that the way the curtailment is applied to the loans. This causes the borrower to save some interest, but that interest still has to be paid to the investor. That payment of interest to the investor is interest expense.

The second issue is payoffs. With the exceptions of FHA loans, most loans allow the borrower to pay interest up to the date of payoff. However, the investor usually requires interest through the end of the month. This difference is interest expense paid for by the servicer.

ArticleNumber:

000055066

    • Related Articles

    • Default Interest

      Default loans calculate and accrue a default interest amount separate from the normal accrued interest amount. This default interest can be calculated on unpaid principal balance, total payment, partial payments, and unpaid principal portion of the ...

    • Setting up Interest Methods, Interest Days, and Principal and Interest

      When you want to set up payments for a loan, the payment records have to be set up with a valid combination of the fields Interest Method, Interest Days, and Principal and Interest Type. These fields are interdependent. System field validation ...

    • Interest Accrual Methodology

      Interest Accrual Methodology- the calculation of the actual daily interest accrual amount is determined by the interest method assigned to the loan. Calculations will be done systematically as follows. Arrears Interest Method: Calculations is unpaid ...

    • Reporting Closing Interest Paid

      To report closing interest paid at year end, perform the following steps. Open the Customer Service application. Click balances. Click Year to Date. Enter your closing interest amount in the Closing Interest field. Enter the same amount in the Gross ...

    • Stop Interest Accrual

      You would like to know how to stop interest accrual altogether for a loan. To stop accruing: Select Accrual Status Go to Customer Service > Others> Accrued Interest Select Non-Accrual ArticleNumber: 000049445