Setting Up Caps and Floors

You can set up caps and floors for floating-rate or adjustable-rate loans on the Pricing Opportunity page.

1. Select Pricing > Pricing.
2. Expand a floating-rate or adjustable-rate loan on the Loans page to see the loan details.
3. Select View Pricing Opportunity.
   The Pricing Opportunity page opens.
4. Select the Rate Type panel.
5. Define the Rate Type.
6. Select View in the Caps & Floors field.
   The Caps & Floors page opens. The instrument's Expected Life shows for reference purposes.
7. Select Add to define the initial set of rate limits.
8. Enter an Interval value to indicate the number of months that the first set of cap and floor rates constrains the instrument's interest rate.

   For a floating-rate loan, caps and floors are applied beginning in the instrument's first month with the Interval value set to the loan's Expected Life.

   
   

   

   
   

   For an adjustable-rate loan, the first Interval value defaults to the number of months remaining after the initial period. For example, if the instrument's initial period is 60 months, then the addition of caps and floors cannot start until month 37.

   
   

   

   
   
9. Enter a Floor Rate value that is more than 0.000 percent and less than the Cap Rate.
10. Enter a Cap Rate value that is higher than the Floor Rate and less than 100 percent.
11. Select Add to set up subsequent or final rate limits as needed.
    Tip: You can add multiple rows. Each new row appears at the end of the table.
12. Enter an Interval, Floor Rate, and Cap Rate value for all rows.
    Note: The sum of the Interval values must equal the instrument's Expected Life.

    You can select Delete to remove a row.

13. Select Save.
14. Select Cancel to return to the Pricing Opportunity page.
    The Caps & Floors check box in the Review of Loan panel is selected when you close the Caps & Floors page.

Example: Starting in month one, the initial floor and cap constrains the instrument's rate for a 12-month interval. Then, in month 13, the instrument's floor and cap changes to the provided values for the remaining life of the instrument.