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Setting Up Collateral Types

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In this article we will look at:

In PrecisionLender, collateral types are set-up for each product.  You can view, edit or create collateral types, in the "Collateral Types" section of each product.  

 

Things To Consider When Setting Up Collateral Types

  • While collateral types can be completely customized to each product, we encourage clients to consider the collateral set independently of the products to which they are associated and to create and manage one list of collateral that will be applied to each commercial loan product.  Approaching the collateral set in this manner can make administration of the collateral list, and corresponding assumptions, more efficient in the long run as the collateral set will be managed consistently across all products.  This approach also provides flexibility for users by enabling the capability of selecting multiple types of collateral in structuring an Opportunity when cross-collateralization is desired in order to strengthen the credit risk profile.
  • We encourage you to make sure the list of collateral, and the names given to each, match the nature of the your business practices.
    • For example:  If agricultural lending is not a focus, then a collateral type for Agricultural Real Estate may not be necessary. 
    • Conversely, if agricultural lending is a significant portion of the business, consideration may want to be given toward having a few types:  Agriculture Equipment, Agriculture Supplies, and Agricultural Real Estate. 
  • The goal is to have a complete collateral set that will support the way the institution does business and commonly structures loans.
  • If you have the Relationship Awareness module: 
    • The collateral types need to be consistent across all commercial products.
    • If you choose to include collateral in you core data files, there may be some collateral types that you want in PrecisionLender for calculating strategic ROE but do not want to include as collateral types a lender can choose on new opportunities. In this case, the collateral types can be arranged so that these are at the bottom of the list. Conversely if they are not included, they will not be mapped over from your core.

 

Editing Collateral Types

To edit collateral types, make sure that you have clicked the "Edit" button in the top left corner of the product screen.  Make sure to click the "Save" button when you are finished editing.

  • Collateral Added by Default: The check-box to the left of the name for each collateral type determines if it gets added to this product by default.  
    • If it is checked, when a new loan of this product type is created, it will automatically have this collateral type added with the default LTV.
  • Name: The name of the type of collateral.
  • Recovery Factor: The net amount expected to be recovered in a default liquidation compared to the original appraised value. 
    • Accounts for legal, carrying, and disposal costs as well as a discount to reflect the time value of money. 
    • For more information see: Recovery Factors
  • Default LTV - Pricing: Default LTV that the institution configures in order to mirror its standard credit guidelines for lending in relation to a specific collateral type.
    • This is what a new opportunity with the selected collateral will default to from an LTV perspective, however, the lender has the flexibility to change this while structuring the deal.
  • Use RA Default: Check the box to use a separate Default LTV for Strategic Value and FTP calculations in Relationship Awareness.
  • Default LTV - RA:  If checked, the product collateral default type and its Default LTV - RA will be used in Strategic Value and FTP calculations for Relationship Awareness.

 

Creating Collateral Types

There are 3 main ways to create Collateral Types: 

 

Insert PrecisionLender Standard Collateral Types

PrecisionLender has two list of Standard Collateral Types that are available to use as is or as a starting point.

 

From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit collateral types for.

Click Edit

Click Collateral Types

Click Replace Wtih..Warning: following these steps will replace all of the collateral types that are currently available for this product.

Click on the set of Collateral you would like to populate with.  Above this tutorial is a list of what is in each set of collateral.

All of the collateral types will be replaced with the set you selected

Remember to Click Save to keep the changes you have made.

products pane of the administration section

Click "Edit" in the top left corner.

Click "Collateral Types" in the menu at the top of the page.

product screen edit and collateral highlighted

Click "Replace With...". Please note that following these steps will replace all of the collateral types that are currently available with this product.

product edit screen, replace with highlighted

Click on the set of Collateral you would like to populate with. 

replace collateral with standard set popup

All of the collateral types will be replaced with the set you selected.

Remember to click "Save" to keep the changes you have made.

product edit screen save highlighted

 

Copy Collateral Types From Another Product

Once collateral types, recovery rates and LTVs have been created for one product, they can be copied from one product to another.

From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit collateral types for.

products pane of the administration section

Click "Edit" in the top left corner.

Click "Collateral Types" in the menu at the top of the page.

product screen edit and collateral highlighted

Click "Replace With..."

product edit screen, replace with highlighted

 

Select the product you would like to copy collateral types from. Note that this will overwrite all current collateral types for this product.

replace collateral with other products popup

 

Click "Finish" when you have selected the desired product. Remember to click "Save" to keep the changes you have made.

product edit screen save highlighted

 

Create Collateral Types Manually

From the Products Pane of the Administration Section, click on the name of the product that you wish to add or edit collateral types for.

products pane of the administration section

Open https://application.precisionlender.com in a supported browser

Click Administration

Click Products

Click On the Product that you wish to add Collateral for.

Click Edit

Click Collateral Types

Click The down arrow to manually add a Collateral Type

Enter a Name for your New Collateral Type

Click "Edit" in the top left corner.

Click "Collateral Types" in the menu at the top of the page.

product screen edit and collateral highlighted

Here you will see all collateral types that are currently available for this product. Select "Add new Collateral Type".

product edit screen add new button highlighted

Enter the name and assumptions for the new collateral type. Repeat this process as many times as necessary.

Remember to click "Save" to keep the changes you have made.

product edit screen save highlighted

 

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