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Using Interest Rate Swaps

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Using Swaps

When you select "Swap" as the Rate Type when pricing a loan, you'll notice a few changes and new fields in the Opportunity Screen.

 

Opportunity Screen with swaps selected as rate type 

Indicative Fixed Rate

  • Fixed Rate we are selling to the borrower; equals the Swap rate plus the Swap Profit. This field is also in the Swap Information pop-up.

Fees

  • The fee summary will reflect the Swap Fee, and there is an additional field for Swap Fees in the Fees pop-up.

Swap Information 

  • Clicking this opens a popup that allows you to define the terms of this Swap.

 

Swap pop up

 

Forward Start Term

  • Allows you to enter an amount of time in months until the actual beginning of the interest rate swap while "locking in" these swap rates

Floating Rate to Bank

  • Floating rate you are buying in this swap

Swap Profit

  • The amount, expressed as a percentage, added on top of the index and spread to give the Indicative Fixed Rate
    • Linked via PV01 to the Swap Fee

Indicative Fixed Rate

  • Fixed Rate we are selling; equals the Swap rate plus the Swap Profit.

Swap PV01

  •  The present value of one basis point per $1 million; factored into calculating the Swap Fee

Swap Fee

  • Calculated as the PV01 amount times the number of basis points of swap spread added

The Swap Information pop-up shows the most recent date PrecisionLender received pricing information from your Swaps provider. This data is tied to your pricing date, which means that you must update your pricing date in order to use the most up-to-date Swaps indicative pricing data. PrecisionLender will update the Swap rates daily as they are available from our Swaps providers. 

 

The Swap fees will also be displayed in the Fee section. Note that the Swap Fee pictured here is generated by the swap transaction, and will be paid to the bank by the swaps dealer. Additional fees in this pop-up are charged to the borrower. On the Financial Statement, the Swap Fee is included with Initial Fees and is annualized over the life of the loan. On the Amortization table (available via Advanced Analytics), the Swap Fee will be applied to the first month's amortized fees/expenses.

 

Fees pop up showing swap fee

 

Since our indicative pricing data comes from our Swap providers, we don't have access to every possible scenario for Swaps pricing. If you enter terms for which we don't have pricing data, you'll see a message in the Swap Information pop-up letting you know that we don't have data available for the loan's current configuration. You'll still be able to save that opportunity, but your Indicative Fixed Rate will only factor in your Swap Profit without the indicative pricing data.

 

Swap pop up showing that indicative pricing is not available.

If you do not see Swaps as a Rate Type Option, please contact your local administrator who can work with PrecisionLender to get Swaps enabled and set up for the product you are using. If you have administrative access and would like to add Swaps as an allowable rate type for one of your products, you can do that in the Product Edit Screen. For more information on setting up products, please visit Setting Up Commercial Loan Products.

 

 

 

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