NetLoan - Manage Variable Rate Index

When variable loan payments are dependent on an index or rate, NetLoan can capture the index or rate upon which the loan rate is dependent. The list of rates available for selection is managed within NetLoan setup center. Each loan can also be assigned an individual spread (margin) that is added on top of the index rate automatically. 

INITIAL SETUP

Complete the following steps when setting up a new index rate for the first time.

1. Navigate to the NetLoan Rate Index List page through NetLoan > NetLoan Setup > Manage Index Rates. Select New NetLoan Rate Index.
2. View full size Enter the Rate Index Name (e.g., SOFR, Prime Rate, LIBOR).
3. On the Rates tab, enter the Effective Date and Annual Percentage Rate applicable to the rate index. Rates will be set up and added moving forward using this tab.
   1. Rates can also be loaded in bulk using NetSuite's CSV import. Import rate records and map the Effective Date and Annual Percentage Rate fields to the parent index record. This must be completed prior to initiating a sync.   View full size
4. Click Save.
5. Link loans to this index. For a loan to receive rate from the index, the loan record must be linked to the corresponding Rate Index.
   1. Open the loan record and click Edit.
   2. On the Accounting tab, select the related index from the Variable Rate Index dropdown.
   3. (Optional) If applicable, in the Variable Rate Spread field, enter the margin in percentage points to be added to the index rate for this loan. For example, if the index rate is 3.50% and the spread is 2.00%, the effective rate applied to the loan will be 5.50%. 
   4. (Optional) Check the Variable Rate Loan checkbox to flag the loan as variable rate. This field is informational only and does not affect rate calculations, but is useful for filtering saved searches, views, and reports to isolate variable rate loans from fixed rate loans. For example, to quickly identify all loans that will be affected when an index rate changes.
   5. Click Save. View full size
6. Select Initiate Sync on the Rate Index record to generate rate records for all tagged loans. A confirmation message will appear once the job is scheduled. Allow a few minutes before proceeding to the next step.  View full size
7. After the rates are created for each loan record, reference the Update Loan Schedules article or the Automatic Modifications article to update loan amortization schedules.

UPDATING RATES

When the underlying index rate changes, follow these steps to push updated rates to the linked loans. Complete this prior to running journal for the change period. 

1. Navigate to NetLoan > NetLoan Setup > Manage Index Rates and open the relevant Rate Index record.
2. Click Edit
3. Add a new row with the updated Effective Date and Annual Percentage Rate on the Rates tab. Alternatively, import update rates via CSV.
4. Click Save.
5. Select Initiate Sync and wait for the background job to complete.
6. Update loan amortization schedules using the Update Loan Schedules or Automatic Modifications article.

HOW SYNC WORKS

When the Initiate Sync button is clicked on a Rate Index record, NetLoan runs a scrip that processes each linked loan as follows:

1. Identifies all active loans using that index, excluding those in Cancelled, Fully Amortized, or Refinanced status.
2. Determines a cutoff date for each loan:
   1. Commenced loans: the start of the earlies unposted schedule line period. Rates tied to an already-posted periods are left untouched.
   2. Pending loans: the start of the earlies open accounting period
3. Deletes any rate records previously copied from that index with effective dates on or after the cutoff date.
4. Generates go-forward rate records using the current index values, plus each loan's Variable Rate Spread if configured.

CURRENT LIMITATIONS

All rate records from a NetLoan index will be pushed to linked loans when a sync is performed. This means that all loans linked to the same index must pull rates with the same frequency and on the same dates as each other. Otherwise, you will need to create a separate index for a loan/loans that pull rates with a different frequency or on different dates. If loans vary widely in terms of the frequency and dates that rates are pulled, it may be simpler to input the rates directly on the Rates tab of the loan records rather than creating and linking multiple indexes.

NetLoan currently does not connect to any external data source. As such, index rates will need to be added to the NetLoan index either manually or via CSV import. This needs to be performed prior to syncing and running journals each month (or as frequently as rates are updated).