Professional Documents
Culture Documents
Oracle Loans
How to Process a Loan along its Lifecycle
01/22/2014
Oracle Loans
Table of Contents
1. Introduction .......................................................................................................................................................3
2. Loan Creation.....................................................................................................................................................4
Page 2
Oracle Loans
1. Introduction
The objective of this presentation is to provide the Oracle Loans users with a step by step guide on how to create a Loan
and process it along its lifecycle. It covers Loan Creation, Funding, Billing and the way to proceed with scenarios like on-
time payments, overpayments, loan payoffs, loan write-offs, loan forgiveness and multiple disbursement loan converted
to a permanent loan.
For pre-requisite Setup and for Data Model, please refer to:
E-Business Suite Financials Advisor Webcast Schedule and Archived Recordings (Doc ID 1455839.1)
Go to 'Archived 2013' tab
Pick 'Oracle Loans Overview - Features, Demonstration & Data Model' from November 13, 2013
Page 3
Oracle Loans
2. Loan Creation
There are two classes of loans: Direct loan and Extended Repayment Schedule (ERS) loan.
A Direct Loan is a direct payment to a customer handled through a check being sent from Accounts Payable. The
resulting bills from this loan create new invoices in Accounts Receivable.
An Extended Repayment Schedule (ERS) loan is converting existing invoice(s) in Accounts Receivable to a loan. An
example of this would be when the customer has trouble making payment on an invoice so you agree to convert it to a
Loan and charge him interest over a period of time.
This is explained in Doc ID 434103.1: What is the Difference Between a Direct Loan and an Extended Repayment
Schedule Loan (ERS)?
Loan Agent responsibility/ Loans Dashboard/ Press the 'Create Loan' button.
Page 4
Oracle Loans
Enter the required information in regions 'Loan General Information', 'Primary Borrower Details', 'Loan Details', 'Rates'.
Press the 'Save and Add details' button.
Page 5
Oracle Loans
You may review other tabs (Interest Rates, Fees, Conditions, Amortization, Related Loans, Notes) if any update is
needed, then press the ‘Apply’ button. You get confirmation:
Loan has been updated successfully.
Page 6
Oracle Loans
Page 7
Oracle Loans
Page 8
Oracle Loans
Now login with the User who has the Loans Manager Role and search on the Loan Number.
You can see that the Loan status is now 'Pending Approval'.
Page 9
Oracle Loans
Page 10
Oracle Loans
Page 11
Oracle Loans
Notes:
- Once the loan is approved, its amortization schedule is generated.
- An approved loan will be recorded in Oracle Ledger, disbursed through Oracle Payables and billed through Oracle Receivables.
Page 12
Oracle Loans
Loan Agent responsibility/ Loans Dashboard/ Press the 'Create Loan' button.
Choose a Loan Product for ERS.
Select the invoice or invoices to be converted to a loan by pressing the ‘Add’ button.
Enter the required information and Apply.
Page 13
Oracle Loans
Page 14
Oracle Loans
You receive confirmation that loan L48501 has been approved and that the original invoice in Receivables will be
automatically adjusted with the approved loan amount.
Page 15
Oracle Loans
Page 16
Oracle Loans
Note:
Page 17
Oracle Loans
Now that the loan is approved, this is time to disburse funds through Oracle Payables, that is to say give the money to the borrower.
This is a two steps process:
- you first generate the AP invoice,
- you then pay the invoice in full.
The loan status will change for 'Active: Fully Funded' and servicing agents will now manage their portfolio for the entire lifecycle of the loan.
Page 18
Oracle Loans
Page 19
Oracle Loans
You are then directed to the following screen where you click on the ‘Submit’ icon.
Page 20
Oracle Loans
The Loan is now in status 'In Funding' (at this stage, the AP invoice is generated).
Page 21
Oracle Loans
Page 22
Oracle Loans
Note:
On 12.1.3, if you get the following error when trying to pay the invoice in full:
APP-SQLAP-97473: The Payment Date is not in an open period
You need to upgrade to APXPAWKB.fmb, version 120.223.12010000.256 or higher.
Page 23
Oracle Loans
Now back to Loans Dashboard: the loan status is now 'Active: Fully Funded'.
Page 24
Oracle Loans
4. Bill a Loan
After Loan Creation and Loan Funding, Servicing activities start with Loan Billing.
Billing is the action to create the receivables invoices (due installments) by running 'LNS: Billing' program.
These invoices can be of three types:
Loan Interest,
Loan Principal,
Loan Fees (Note that we have no fees in this presentation).
Note:
Use the ‘LNS: Allow to Bill and Pay from UI’ profile option to control user access to Bill and Pay transactions from the UI. The available values are:
No: Default value. This will restrict user access to the functionality.
Bill Only: User can only bill the transactions, if they are ready to be billed, from the UI without applying payments.
Bill and Pay: User can bill and pay for the transactions displayed on the UI.
Page 25
Oracle Loans
Run 'LNS: Billing' program (note that it can be run with the Loan Number as parameter).
Page 26
Oracle Loans
Page 27
Oracle Loans
Once the request is successfully completed, you may click on the ‘Details’ icon then press the ‘View Log’ button to view
the log file.
Page 28
Oracle Loans
Page 29
Oracle Loans
Or you may click on the ‘Output’ icon to open or save the output.
Page 30
Oracle Loans
Page 31
Oracle Loans
Note:
If a bill that you issued to a borrower is incorrect, then you must use the ‘LNS: Reverse Last Bill’ concurrent program to credit the original bill.
You can optionally re-bill the loan at the same time. Alternatively, you can complete the credit, or credit and re-bill process from within the Servicing tab.
Page 32
Oracle Loans
The borrower pays his first installment on time. To reflect this, you create a receipt for this first installment (1008.34) in Oracle Receivables and apply this receipt to
the invoices related to this loan installment.
Oracle Receivables/Receipts/Receipts
Press the ‘Search and apply’ button and search on loan number L43504.
Page 33
Oracle Loans
Page 34
Oracle Loans
Check the ‘Apply’ checkbox for the invoices (Loan Principal and Loan Interest, Loan Fees if any) and save.
Page 35
Oracle Loans
Page 36
Oracle Loans
In Servicing > Payments > Current Amortization, ‘Amortization Schedule’ region, you can view the remaining
installments to be paid.
Use the Amortization Schedule to view current unbilled payments for a loan. Throughout the life of a loan, this schedule dynamically reflects changes to principal,
interest, and fees due to events such as loan approval, interest rate changes, extra payments, short payments and late fees.
Note:
If you want the loan to be paid by credit memo, you need to bill the loan first to have the invoices created in Oracle Receivables then create a credit memo with reason
code= LOAN_PAYMENT against the invoice.
See FAQ Doc ID 1531137.1 : How Can You Use A Credit Memo To Pay Loan?
Page 37
Oracle Loans
When the borrower remits an overpayment, you can create a manual bill and then apply the overpayment to this
manual bill. Loans will reduce the beginning balance for the next payment to be billed and recalculate the remaining
principal amounts (See Amortization tab).
Note that the loan needs to be in status ‘Active: Fully Funded’ and you need to create the manual bill only after you
receive the payment.
As an example: Loan number L42283, loan amount 100,000.00 USD, status is ‘Active: Fully Funded’.
Page 38
Oracle Loans
Page 39
Oracle Loans
Page 40
Oracle Loans
It takes you to this screen. Press the ‘Add New Manual Bill’ button.
Page 41
Oracle Loans
Page 42
Oracle Loans
You are directed to this screen where you can see that Loans defaults the current principal balance (100,000.00) in the
amount field.
Page 43
Oracle Loans
If your intent is not to pay off the loan but only to create a bill for the purpose to pay 5,000.00 on the Principal, then
update the Amount field with 5,000.00 and provide the Due date. Press the ‘Submit’ button.
Page 44
Oracle Loans
Page 45
Oracle Loans
This overpayment is reflected in the Amortization Schedule as Beginning Balance now displays 95,000.00
Page 46
Oracle Loans
and in Oracle Receivables where the Loan Principal invoice for the corresponding amount is automatically created.
Note:
By creating a manual bill, you are reducing a part of the Loan Principal by the amount of the overpayment received from the borrower. It will create an invoice of
type Loan Principal in Oracle Receivables.
This is different from billing by running 'LNS: Billing' program (section 4) which generates due installments (invoices for types Loan Interest, Loan Fees, Loan Principal
in Oracle Receivables).
Page 47
Oracle Loans
Re-query the loan then go to Servicing > Payments > Outstanding Bills
Click on the value (0) displayed in ‘Payment Number’ field.
Page 48
Oracle Loans
It takes you back to this screen. Press the ‘Apply Receipt’ button.
Page 49
Oracle Loans
Press the ‘Add Receipts’ button. Select the receipt number and Submit.
Page 50
Oracle Loans
Page 51
Oracle Loans
Page 52
Oracle Loans
Payoff process is when the borrower completely pays off all due loan amounts including fees and interest.
Page 53
Oracle Loans
Page 54
Oracle Loans
Go to Oracle Receivables to create a receipt on the customer for the Payoff. Do not apply this receipt.
Page 55
Oracle Loans
Page 56
Oracle Loans
Page 57
Oracle Loans
Search on the Loan number. The loan status is now 'Paid Off'.
Notes:
- Creating of a manual bill for remaining principal and adjusting it in AR will not pay off the loan but will pay off only principal portion of the loan. Any
unpaid interest and fees will keep pending and it will prevent the loan from turning into payoff status. Only when the interest rate is 0% then creation of a
manual bill for remaining principal and adjusting it in Receivables would set the loan to ‘Paid off’.
- Loans Development has created a Loan Cancellation API that allow customers to cancel loans during servicing with variety of actions including ignoring
unbilled interest and fee portions, adjusting or crediting unpaid loan portions. Also for ERS loans it allows you to adjust back original AR invoices. The
Loans Cancellation API is part of the latest 12.1 standalone Patch:12318025:R12.LNS.B - IMPORTANT FIXES ON THE TOP OF LNS 12.1.3 RELEASE - MAR
2011
Page 58
Oracle Loans
5.4 The borrower cannot pay and the loan will be written-off
In the case the borrower cannot pay off his loan, the lender needs to write-off the loan amount in the form of Invoice-Adjustment.
In order to demonstrate the write-off functionality, let us take loan number L44501 in status ‘Active: Fully Funded’. This loan has 1 single installment.
Page 59
Oracle Loans
Page 60
Oracle Loans
Page 61
Oracle Loans
Page 62
Oracle Loans
Page 63
Oracle Loans
Then run the ‘LNS: Billing’ program with the loan number as parameter.
Re-query the loan in the Loan Dashboard.
You can see that the loan status is now ‘Paid Off’ and the ‘Principal Balance’ is zero.
Page 64
Oracle Loans
Page 65
Oracle Loans
Note:
If you create a loan with fees, you should run LNS: Fee Assessment program daily and before LNS: Billing program to determine the fees for the billing program to bill.
As Loans Agent, you can also run the LNS: Loans Maintenance and Billing request set from a Forms application such as Receivables. This request set runs both the LNS:
Fee Assessment and the LNS: Billing programs. This request set is not available from the Loans application.
Page 66
Oracle Loans
'Loan Forgiveness' functionality is the ability to specify a percentage of the loan that is to be automatically written off
(forgiven) each month. When the loan is billed, the installments are automatically adjusted by this percentage.
Loan Administration responsibility/ Setup/ Loan Product, Loan Forgiveness Program region
Set ‘Enable Forgiveness Program’ to Yes on the loan product that will be used to create the loan.
Page 67
Oracle Loans
Page 68
Oracle Loans
Loan Administration responsibility > Setup > System Options > ‘Loans Forgiveness Adjustment region’ > ‘Activity Name’
field
Assign the AR Receivables activity to Loans Forgiveness Activity Name.
Page 69
Oracle Loans
Page 70
Oracle Loans
To enable the Loans Forgiveness Program for a loan, go to Origination > Overview > General tab > ‘Loans Forgiveness
Program’ region and set ‘Enable Forgiveness Program’ to Yes. Also set ‘Percent of Installment (%)’ to a value from 0 to
100 (this is the % to be forgiven).
Page 71
Oracle Loans
After approving the Loan, the amortization schedule will be generated per the details of the loan. This will look like the
normal amortization.
Page 72
Oracle Loans
After the loan is billed, the normal installments are created. But they are automatically adjusted using the receivables
activity defined.
Example:
Loan L47502 = 7,000.00 USD
Term = 3 months
Forgiveness Percentage = 10%
When running the billing, it creates an AR invoice for 2,314.00 USD and automatically adjusts it by 10%. So the invoice
has a balance of 2,082.60 USD.
Page 73
Oracle Loans
Note:
Loans Forgiveness Program can be enabled /disabled at any time during loan's servicing. Any changes to Loans Forgiveness Program parameters are recorded in the
Loans History under Servicing > Servicing Center > Loan History.
Page 74
Oracle Loans
5.6 Multiple disbursement loan converted to a permanent loan after the final disbursement in AP
At this stage, if you try to approve the loan you get an error message:
‘You cannot submit this loan for approval until the disbursement schedule is valid.
Create a disbursement schedule.’
Page 75
Oracle Loans
Page 76
Oracle Loans
Page 77
Oracle Loans
Page 78
Oracle Loans
Back to Loan Dashboard, the loan is now in status ‘Active: Partially Funded’.
Page 79
Oracle Loans
Click on YES.
Page 80
Oracle Loans
You are directed to this screen where you can see that the second row is now ‘In Funding’.
Page 81
Oracle Loans
Page 82
Oracle Loans
Page 83
Oracle Loans
Now bill the loan by running the ‘LNS: Billing’ program. This will create the Loan Interest invoice in Oracle Receivables.
As you can see, only the loan interest invoice is created. No invoice for principal is created since the principal is now converted to a permanent loan.
Page 84
Oracle Loans
Page 85