Past Due Adjustments

Complexity:    

Audience: Loan Servicer or Collector, Upper Management, Accounting, Compliance, Loan Servicing/Collections Managers

Introduction

While rare, it's possible that you need to make an adjustment to a loan's amount past due (APD) or days past due (DPD). This could be necessary for a number of reasons, such as resetting past due amounts when granting relief to eligible borrowers due to a natural disaster. Whatever the circumstances, making past due adjustments is quick and easy with LoanPro's Past Due Adjustments tool. In this article, we'll explain how to use the tool as well as explain some common uses and questions.

The Past Due Adjustment tool is part of our Setup Tools collection. If you haven't read about our Setup Tools before, we recommend taking a look.

How Past Due Adjustments Work

Past due adjustments are a tool for manually changing the amount and days past due on an account. Adjustments don't change a borrower's balance, and they don't forgive a portion of money. The adjustments are used for record-keeping purposes and as a way to ensure other parts of your settings—such as rules and interest—are working as you'd like.

Past due adjustments are broken up into two different categories: days past due adjustments and amount past due adjustments. The difference in these two categories is as you'd expect, as days past due adjustments affect days, and amount past due adjustments affect amount. These two things (days and amount) are what is used to calculate delinquency, and they work together in tandem. Below, we'll explain how to add adjustments.

Days Past Due Adjustments

Let's start with the simpler of the two categories. Days past due adjustments are used to adjust the amount of days a payment is late or "past due". To log a days past due adjustment, navigate to a loan and select Account Setup > Setup Tools > and Past Due Adjustments from the drop-down menu.

Here, you can create, edit, and delete days past due adjustments. To create a new adjustment, click 'Add'. Clicking 'Add' will display a window where you can select a date for the adjustment. The day you select will be the day the the system thinks the last payment was made. For example, if a loan's last payment was due 10 days ago, and you set the date 5 days in the past, the loan will now be 5 days past due.

Once you've selected a date, hit 'Save' to complete the adjustment.

Amount Past Due Adjustments

Amount past due adjustments work in a similar way, and they're even located in the same place in the UI. To add an adjustment, navigate to a loan and select Account Setup > Setup Tools > and Past Due Adjustments from the drop-down menu. Now, click 'Amount Past Due' on the left. Finally, click 'Add' in the top right corner. This will display a window that is a bit more robust than the days past due adjustment window.

With an amount past due adjustment, you can adjust the amount and days past due. In addition, there are two types of adjustments: Fixed Dollar Amount and Zero Balance. Fixed Dollar Amount adjustments allow you to deduct a specific dollar amount that the loan is past due. On the other hand, the Zero Balance adjustment allows you to remove the past due amount entirely.

If you're adjusting the amount past due on a loan, the value you put in the 'Amount' field deducts from the current amount past due. For example, if the loan is $250 past due and you enter $50 into the 'Amount' field, the loan's amount past due will now be $200.

Conversely, a loan can't have a negative amount past due balance. If your loan is $250 past due and you enter $300 into the 'Amount' field, the loan's past due amount will be capped at 0.

Both adjustment types will need a date, and this date field works exactly like the days past due date field. Here's a description if you missed it above: The day you select will be the day the the system thinks the last payment was made. For example, if a loan's last payment was due 10 days ago and you set the date 5 days in the past, the loan will now be 5 days past due.

Once you've selected a date and an amount, hit 'Save' to complete the adjustment.

Common Uses & Questions

Past due adjustments can be made for any reason; however, a real example of use for this tool applies to lenders who need to offer disaster relief. If a borrower becomes a victim of natural disaster, they're likely to become past due on their loan payments. Depending on the situation, they may qualify for disaster relief, and setting a zero balance for their past due amounts may even be a requirement for the lender.

Can I use an adjustment to make a loan's amount past due higher than it currently is? No. The adjustment tool will only allow you to subtract from the current past due amount.

Does this tool forgive loan amounts? No. The loan amounts will remain the same, and the borrower will be expected to pay off their loans as usual unless they're offered a credit by you.

Interest Adjustment Transactions are like past due adjustments but for interest instead. If you often make adjustments on activated loans, interest adjustments are a topic worth reading about. Also, since Delinquency Buckets deal with past due amounts, you may be interested in learning more about them as well. Lastly, if you're looking for a way to offer money back to a borrower, a Credit will let you do so.

What’s Next

Past due adjustments are a part of our Loan Servicing category of articles. While we don't go into further detail about past due adjustments, there are more servicing tools available. We recommend taking a look at the other articles available in this category to see which tools interest you.


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