We currently have two major recipes we’re cooking related to our Contract Variable Rate Loan features: adding support for automated payment changes on LOCs that are prompted by a change to the variable rate itself, and adjusting content on the contract variable rate change notices.
Automated Payment Changes for Contract Variable Rate LOCs Upon a Rate Change
This project will add new functionality to Variable Rate Contract Loans in order to support automated payment changes prompted by a change to the rate on a MEMBER6 loan (LOCs and other open-end loans) with a contract variable rate code. CUs will be able to elect to do automated payment changes prompted by a variable rate change, either using the existing maturity date on the loan, or by recalculating a new maturity date according to a table of terms based on the loan’s balance.
While CU*BASE can already handle automated payment changes when rate changes are applied to MEMBER5 mortgages and other closed-end loans, there is no similar mechanism to properly calculate the new payment on open-end loans such has HELOCs in MEMBER6.
To meet this need, we’ll be adding add new flags to the contract itself to allow CUs to choose:
- Should a rate change prompt a change to the member’s payment?
- If yes, should the payment change cause the loan’s maturity date to be changed? If not, what term should be used to calculate the payment? (Will provide a table with balance ranges and terms only.)
- How long should the delay be between changing the rate and calculating a new payment (so notifications can be sent), and what should the minimum payment amount be?
In other words, a credit union could elect to do automated payment changes prompted by a variable rate change, using only the “Table” method that’s available for payment changes due to disbursements, but with more limited options.
Status: Project #60112 was implemented with the 23.05 release.
Adjusting Content on Contract Variable Rate Notices
We have had many internal discussions on revamping these notices altogether to allow them to work more like regular notices, complete with CU-customization options. However, the way our contract variable rate products work, the notice generation is integrally linked to the actual payment changes themselves. It was designed this way to allow CUs the flexibility to choose whether a particular rate change would actually happen, on the fly. It is not feasible at this time to completely rewrite all contract variable rate products to move to a different notice process.
Instead, we adjusted the verbiage on the general contract variable rate change notice, to make them conditional based on certain contract settings (such as LOC versus a closed-end mortgage), as well as to add the word “estimated” to the calculated monthly payment amount. Changes were completed in October 2023.
Your chef for these recipes: The Lender*VP Team