Payment Type and Waterfall Application

Introduction

LoanPro's payment types feature allows you to choose a payment's waterfall application—the order in which the money applies to the different parts of a loan, like interest, principal, and fees. Some payment types (like Principal Only) will direct all funds into one or two areas, and others will include all the same parts, but in a different order. This can be useful if you have one area of a loan that is more important than others, like the escrow account of for taxes. It's also useful if you allow borrowers to make payments toward specific areas, like paying off a fee.

This article will explain how to set up payment types, and Payments – Intermediate walks you through the process of logging a payment, showing where to select a specific type. If you're not familiar with how payments work in LoanPro, we recommend reading Payments 101 first.

Default Payment Types

You're tenant should automatically have a few default payment types. Here's the full list:

  • Regular. This is a normal type of payment you can make.
  • Principal Only. This is if you want to make a payment solely to principal.
  • Discount. This is a payment that only goes towards discount.
  • Fees Only. This is a payment that only goes towards fees.
  • P&I. This type of payment goes towards both interest and principal.
  • I&P Only. This type of payment goes towards interest and principal.
  • IFP. This type of payment would go towards interest, fees, and principal.
  • Escrow. This type of payment would go towards escrow.
  • Custom. This type of payment allows you to 'force' how a payment will allocate (ex. $100-principal, $50-fees, and 25-interest).
  • Payoff. This type of payment goes only towards payoff on the loan.
  • Payoff Fees then Due Fees. This payment type goes towards payoff fees and then towards due fees.
  • Interest, Payoff Fees, Due Fees, Principal. This payment type goes towards Interest, payoff fees, due fees, and then principal.
  • Custom - User Forced. This is similar to custom type but this allows you to put extra towards the amount you are "forcing" the payment to allocate to. If you pay off more interest than is due, this will let interest due on a loan go negative.

Configuring Payment Types

In addition to the default types, you can create your own. Payment types can be created and edited by navigating to Settings > Loan > Payments > Types within your company account. As shown below, click 'Add' to create a new payment type.

To create a new payment type, click 'Add'.

Here, you can determine the settings for your new payment type. Begin by giving the payment type a name and selecting a status. By default, new payment types are set to "active," but you can change this with the 'Status' drop-down.

Next, choose the order that the payments will apply by using the Payment Application selection area. This area includes a list of several default areas of the loan, as well as any escrow buckets you've created.

Expand the Full List of Payment Waterfall Components
Here's a full list of the components you can incorporate into your payment waterfall application:

Component

Description

Due Principal

Principal that has come due so far on the loan that has not yet been paid.

Due Interest

Interest that has come due so far on the loan that has not yet been paid.

Due Fees

Fees that has come due so far on the loan that has not yet been paid.

Payoff Fees

Unpaid payoff fees on the loan. These have not come due yet, and only come due at payoff. Adding them to the waterfall application will let payments apply to them earlier.

Principal Balance

The unpaid portion of the loan principal. This is not a due amount of principal, but will let payments apply to principal before they apply to any other portion of the loan.

Due Discount

Discount that has come due so far on the loan that has not yet been paid. Discount is a revenue portion of the loan principal.

Due Escrow

The total escrow that has come due so far on the loan that has not yet been paid. This is the total for all escrow buckets.

Due Amounts for Individual Escrow Buckets

A separate item will be available for each escrow bucket. This lets payments apply to buckets that are higher priority than others.

To specify the order of application, click the loan portion that you want the payment to apply to first and then click > to add it to your chosen order. Repeat this process with the other loan portions in the order you want payments to apply to them.

Since discount is a portion of principal, choosing "Due Discount" will also choose "Due Principal" and vice versa. Whichever one you select is the one that payments will apply to first.

If you select “Due Escrow” from the payment portions, a new selection will appear that will let you specify how the order of the payment will apply to individual escrow buckets. You can add escrow buckets to the application order in the same way as adding other payment portions.

If a payment is not fully applied using a particular payment type, the unapplied portion will apply to principal by default. For example, if you were to use a payment type that only applied to standard fees, but there were no outstanding fees on the loan, then the payment would apply to principal instead.

Finally, you can enter a description of the payment type in the description field. This description will be accessible when a payment is logged so that the payment application will be clear for you and your users.

The 'Example' portion of the page will give you an idea what this will look like on the Payments tab inside a customer account.

Once you have entered the information for the payment type, click 'Save'.

You also have the option to activate or inactivate payment types. This will determine if they are available when logging a payment. Inactivate a payment type by selecting the X icon to the right of the payment type; this is the off switch. An inactive payment type will show a checkmark instead of an X. To reactivate a payment type, click the checkmark; this is the on switch.

In the screenshot above, the first item is active while the second item is inactive.

What's Next

You might also be interested in some of the other articles we've written on different aspects of payments. Payments – Intermediate walks through logging a payment, and touches on areas like the Payment Information page and Interest Application settings.


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