Overview
PrecisionLender provides a great deal of flexibility in establishing Origination Channels and Servicing Channels, including stratification by loan amount, to capture associated origination and servicing expenses in order to calibrate overall assumptions.
In this Article
- How Should I Set Up Servicing Channels?
- Servicing Channels
- Creating Servicing Channels
- Disabling Servicing Channels
How Should I Set Up Servicing Channels?
PrecisionLender has default settings for Servicing Expenses that many of our clients choose to use.
- An initial provisioning of PrecisionLender will have the most recently available assumptions.
- You can use the "Replace With" functionality detailed in this article to apply those assumptions.
- For more information on this study, please see: Current Originating and Servicing Cost Guidance (you must have login access to view this study).
However, since some institutions may have accounting functions or processes that have already established methodologies for Activity Based Cost Accounting (ABC) or standard FAS91 approaches to establishing these cost assumptions, we encourage you to use your internal assumptions, if this makes the most sense in aligning with other areas of the bank in terms of analytics and reporting, and if it also fits well with loan pricing and profitability management.
Servicing Channels
The Servicing Channels provide the capability to establish annual ongoing servicing expense assumptions. For example: payment remittance processing and operation tasks such as mailing statements, IRS tax reporting, and collections.
- Enable
- If unchecked, the Servicing Channels defined in the product setup cannot be adjusted on the Opportunity Screen.
- If checked, lenders will see the Custom option and be allowed to customize the available Servicing Channels on the Opportunity Screen.
Note
The channel Custom will not be listed in the product setup. It will only be visible on the Opportunity Screen. - Default
- The servicing channel with the checked box will be the channel that is selected for this product when a lender creates a new loan.
- Name
- The name of the servicing channel. If you have Relationship Awareness the names of the servicing channels must be same for all commercial loan products.
- Amount
- Loan Amount or Commitment that the related servicing expense is valid for. More Tiers can be added by clicking the blue down arrow button at the bottom of this column.
- Annual Servicing Expense
- This is the annual servicing expense to the bank for this loan.
- Percent of Amount
- Allows you to set a percentage of amount for the associated tier.
- Percent of Average Balance
- Allows you to set a percentage of average balance for the associated tier.
- Percent of Revenue
- Allows you to set a percentage of revenue for the associated tier.
- Percent of Commitment
- Allows you to set a percentage of commitment for the associated tier.
Creating Servicing Channels
There are 3 main ways to create Servicing Channels:
- Insert PrecisionLender Standard Servicing Channels
- Copy Servicing Channel From Another Product
- Create Servicing Channels Manually
Insert PrecisionLender Standard Servicing Channels
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From the Products Pane of the Administration Section, select the name of the product that you wish to add or edit servicing channels for.
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Select Edit in the top left corner.
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Select Servicing Channels in the menu at the top of the page.
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Select Replace With... Please note that following these steps will replace all of the servicing channels that are currently available with this product.
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Select the 'Standard Set' and then select the set of origination channels you would like to populate with, then 'Next'.
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If you'd like to apply a factor to the expense amounts, enter the percentage in the field.
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Select Finish. All servicing channels will be replaced with the set you selected.
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Remember to Save to keep the changes you have made.
Copy Servicing Channels From Another Product
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Once origination channels have been created for one product, they can be copied from one product to another.
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From the Products Pane of the Administration Section, select the name of the product that you wish to add or edit servicing channels for.
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Select Edit in the top left corner.
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Select Servicing Channels in the menu at the top of the page.
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Select Replace With... Please note that following these steps will replace all of the servicing channels that are currently available with this product.
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Select 'Other Products' and then the product you would like to populate with, then click Next.
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If you'd like to apply a factor to the expense amounts, enter the percentage in the field.
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Select Finish. All servicing channels will be replaced with the set you selected.
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Remember to Save to keep the changes you have made
Create Servicing Channels Manually
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From the Products Pane of the Administration Section, select the name of the product that you wish to add or edit servicing channels for.
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Select Edit in the top left corner.
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Select Servicing Channels in the menu at the top of the page..
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Select Add New Servicing Channel.
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Enter the name of the channel, Target ROE adjustments if applicable, the Servicing Expense and/or Percent of Amount and/or Percent of Average Balance and/or Percent of Revenue. If costs vary by commitment amount, select Add Expense Tier to enter the commitment amount the cost will be applicable for.
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Remember to Save to keep the changes you have made
Disabling Servicing Channels
Within PrecisionLender, you can disable Servicing Channels so that lenders will not see this field when pricing a new Opportunity. This is done by product within the Administration section of PrecisionLender.
Note
Disabling Servicing Channels will affect PrecisionLender’s engine calculations. If you are unsure about disabling these, please contact Support.
How to Disable Servicing Channels
Disabling the Servicing Channels field from the Pricing Screen is configured per product. To do so, navigate to the Administration section of PrecisionLender and select ‘Products’ from the left-hand menu. Select the Product you wish to disable Servicing Channels on. Once the Product Assumptions screen is open, select ‘Edit’ in the top left corner. You can then either scroll down to the Servicing Channels section or select ‘Servicing Channels’ from the header. Remove all but one Servicing Channel and uncheck the box next to ‘Enable general expense customization (including Custom channel) on opportunities’. Scroll back to the top of the page and select ‘Save’. If you’d like to apply this to every product, you can utilize the Propagate Icon to do so.
Note
Changing to the new servicing levels may result in significant changes to actual ROEs. We recommend establishing a few test loan products ‒ by splitting out testing regions in your chosen products that include these new costs ‒ to determine the difference in ROEs under the recent and the newly-recommended defaults. Consequently, these results may suggest adjustments to targets are needed. Alternate Pricing Regions in PrecisionLender enables you to dynamically change your pricing region directly on the opportunity screen. For step-by-step instructions on how to create a test region, break out existing products for testing, and switch to those test regions when desired, please follow this guide.