Setting Up Commercial Loan Products

In This Article

The Commercial Product Edit Screen

SUP-SUC-2.png

 

Toolbar Header Region Tabs

Edit

  • The "Edit" button will allow you to change the settings of the product.

Save

  • After you click the "Edit" button, the "Save" button is how you save any changes you have made to the product.
  • If you leave the screen without saving, any changes you have made since the last save will be lost.

Print

  • The "Print" button allows you to print off the settings of this product.
  • The "Print" button is not visible while editing.

Close

  • The "Close" button will leave the product and take you back to the Administration Section.
  • Make sure that you save your work before closing if you would like to keep the changes you have made.

 

Product Configurations & Defaults 

General

Product_Configurations_and_Defaults.png

 

Product Enabled

When checked, this product will be available to lenders for pricing.

Default Amount
If you need to change the default amount for a loan product it is really simple to do in PrecisionLender for any user with the requisite rights and privileges.
FFIEC / HMDA Lien Status
  • Not Applicable
  • Secured by a First Lien - 1.5% Spread Limit
  • Secured by a First Lien and Eligible for Small Creditor Exemption - 3.5% Spread Limit
  • Secured by a Junior Lien - 3.5% Spread Limit
Base Target ROE
In PrecisionLender the Target ROE is one of the main ways to guide lenders. Technically speaking, PrecisionLender calculates a risk adjusted return on risk adjusted capital (RAROC), however, for simplicity we refer to it as ROE.
Adjusted Target ROE
Target Return that takes into account adjustments made at the product level, typically based on risk ratings.
Available Regions
  • Regions for which these settings are active are signified with a check next to the region name.
  • See Customizing Products by Region
    • Split Out Region
      • Allows you to choose regions to separate from this group of regions so they can have separate assumptions.
    • Collapse Into Region
      • Allows you to collapse this group of regions into another group of regions that you select.
      • Only available if the Full Regionality and Advanced Funding module has been licensed.
Enable Conversion Products
Conversion products allow you to price a shorter term product, like a Construction Loan, and then have it later convert into the permanent structure.


Policies & Defaults 

SUP-SUC-4.png

Policies Defaults

Funding Package Override

  • Check this box if you want to override the funding package set at the regional level for the particular product. All funding packages are available for selection. Only one funding package can be selected.

Override Fixed Rate Spread Lock Funding Curve Family

  • Check this box if you want to override the regional setting for the Funding Curve Family that is used to calculate the Spread Lock on a fixed rate loan for the product type that you are setting up.

Maximum Allowed Rate Lock Duration

  • The maximum duration allowed for rate locks for loans of this type.

User can specify Expected Life

  • Check this box if you want users to be able to specify an Expected Life shorter than the Maturity of the loan being priced.

 

Policies Defaults
Allowable Payment Types
  • Amortizing
  • Amortizing / Level Principal
  • Single Pay / Interest Only
  • LOC
  • Letter of Credit
  • Scheduled Draws
  • Scheduled Repays
  • Scheduled Draws and Repays

For more information: Payment Type Options

 

Policies Defaults

Allowable Letter of Credit Types

 

Policies Defaults
Allowable Rate Types
  • Checking the box will make that rate type available for this product.
  • Available Rate Types
    • Fixed
    • Floating
    • Adjustable
    • Swap

Enabled Scheduled Structures For

 

Policies Defaults
Allowable Float Index Families
  • Checked indices will be available for the lender.
  • Options:
    • LIBOR
    • Prime
    • Treasury
    • Funding Curve
    • Federal Funds
    • SOFR
    • All Custom Indices
    • Individual Custom Indices

 

Policies Defaults

Allowable Adjustable Index Families

  • Checked indices will be available for the lender.
  • Options:
    • LIBOR
    • Prime
    • Treasury
    • Funding Curve
    • Federal Funds
    • SOFR
    • All Custom Indices
    • Individual Custom Indices

 

Policies Defaults

Allowable Swap Index Families

  • Checked swap indices will be available for the lender.
  • Options:
    • LIBOR
    • Prime

 

Policies Defaults

Default Annual Fee

  • The annual fee that will be originally set when a new loan using this product is created.

Default Origination Percent

  • Percentage of the loan amount or commitment that will be added to the fees when a new loan of this type is created.
  • This is a one-time fee charged at origination.

Default Origination Dollars

  • Dollar amount that will be added to the fees when a new loan of this type is created.
  • This is a one-time fee charged at origination.

Unused LOC Annual Percent

  • Percentage of the unused amount of commitment that will be added to the fees when a new loan of this type is created and the payment type is LOC.
  • This is an annual fee.

 

Policies Defaults
Allowable Interest Calculations
  • Checking these boxes will allow that interest calculation to be available for this product.
  • Interest Calculations
    • Actual/360
    • Actual/365
    • Actual/Actual
    • 30/360
    • 30/365

 

Policies Defaults
Allowable Tax Exemption Types
  • Checking any box here allows that tax exemption type to be available for this product.
  • Tax Exemption Types
    • Not Tax Exempt
    • Fully Tax Exempt
    • Bank Qualified
    • Non Bank Qualified
    • Custom Non-Bank Qualified

 

Policies Defaults

Scaling Factor Enabled

 

Credit Configurations & Assumptions

Credit_Configurations.png

 

Loss Given Default Calculation Method

Allows you to set the LGD Calculation Method used for this product.

  • Options:
    • Facility Ratings
    • Collateral
Facility Ratings
Facility Ratings allow you to enter specific tiers of LGD for your lenders or RMs to choose from, instead of allowing PrecisionLender to calculate your LGD from your collateral and guarantees.
Collateral Types
Guarantee Types
To account for the economic impact of guarantees, PrecisionLender allows the bank to set up specific Guarantee Types to reflect the different kinds of guarantees that are commonly part of commercial loan opportunities.
Risk Ratings
PrecisionLender allows for borrower risk rating categories to be mirrored after your internal risk rating scale with as few or as many required.

 

Financial Configurations & Assumptions

 

Capital / Annual Loss

Typically the Credit Capital and Annual Loss assumptions are based on the output of the credit migration analysis performed in consultation with PrecisionLender.

Operational & Market Risk Capital Allocation
  • Represents the capital necessary to hold against operational and market risk that exists regardless of borrower creditworthiness.
  • Entered as a percentage of the loan balance plus a percentage of revenue.
Use Net Interest Income as Revenue in Operational Risk Capital Calculations
  • If you do not include capital in funding, you may use Net Interest Income as revenue, instead of Gross Revenue, in Operational Risk Capital Calculations.
  • This option is enabled by default when creating new Commercial Loan products.
Absolute Minimum Capital Allocation
  • Can also be set by Risk Rating within the Risk Ratings area.
  • If set at Product and Risk Rating levels, the maximum of the two minimums will be used in computations by the math engine.
Absolute Minimum Annual Loss
  • Can also be set by Risk Rating within the Risk Ratings area.
  • If set at the Product and Risk Rating levels, the maximum of the two minimums will be used in computations by the math engine.

 

Allowable Exposure Types (Risk Weight)

  • "Unspecified Risk Weight (100%)" is the default exposure type for products in PrecisionLender.
  • If you have anything other than "Unspecified Risk Weight (100%)" selected on a product, users will begin seeing a new section within the Opportunity called "Exposure". Here the user will be able to select the exposure type per loan. See Loan Products with Special Regulatory Capital Requirements.
  • If the exposure type is a Foreign type, the user will be allowed to select a country type. The risk weight that is returned per country is based on Basel standards.
  • Default Exposure Type is the option that will be originally set when a new loan of this type is created.

Note

If a product already has a Minimum Capital Allocation, the minimum would be multiplied by the risk weighting. Minimum Capital Allocation is set in Risk Ratings

 

Origination and Servicing Channels

 

Prepayment Options

 

Other

Relationship Awareness Defaults

other.png

 

Minimum Functional Maturity - FTP
  • When a loan is approaching maturity, some values can be overstated or understated due to the short term of the calculations.
  • Any value entered here will override the 1-month default.
Minimum Function Maturity - Strategic
  • When a loan is approaching maturity shorter than a typical maturity for this product type, a functional maturity value will be assigned in order to calculate the loan as a newly originated loan.
  • Any value entered here will override the defaults of:
    • 12 months for LOCs and Draws
    • Minimum (original loan maturity, 36 months) for Amortizing and Single Pay
Origination Fees
  • This is used to set different origination fee defaults for loans coming through Relationship Awareness than the defaults for loans being priced. If this box is unchecked, RA will use the defaults for loans being priced, configured in the Origination section above.
  • By checking the "Enable Origination Fees" box you can enter a new Relationship Awareness-only default value.
RA Loss Given Default Calculation Method
  • This selection will only be visible if your organization has enabled the Facility Ratings loss given default (LGD) calculation method. It allows you to set the LGD calculation method for loans coming through Relationship Awareness.
  • Options:
    • Collateral and Guarantees (default)
    • Facility Ratings

 

History

The History section at the bottom list all of the dates that changes were made to the product. You can see how the product was configured on a specific period by selecting its date.

 

Product_History.png

 

 

Related Articles