The loan officer must construct an approximate draw schedule on the
Pricing Opportunity page when pricing a new loan that is
associated with a construction or land development Payment
Type.
Forward rates are applied to a construction or
development loan's advances, which are based on its draw schedule. A forward rate is an
interest rate applicable to a financial transaction that takes place in the future.
The Draws panel is only available for loans
with Construction or Land Development as the
Payment Type on the Pricing
Opportunity page.
Note: You can assign the
Construction or Land DevelopmentPayment Type to a product on the page.
Construction Loans
You can select the Draws
panel on the Pricing Opportunity page to set up the draw schedule. When
you enter values, the Save and Cancel buttons
become active.
For construction loans, only four fields appear:
- Maximum Usage
- Enter 100 percent if you expect the borrower
to use the full amount of the line. If you do not expect the borrower to use the
full amount, then enter an appropriate smaller percentage. The value in this
field cannot exceed 100 percent.
- Initial Draw at Closing
- Enter the initial draw amount. This amount is frequently larger than
subsequent draws. The remaining balance is spread equally between the remaining
draws.
- # of Draws After Initial
- Enter the expected number of subsequent draws.
- Month of Final Draw
- Enter the value that represents the number of months until the final
draw. The number entered here cannot exceed the expected life of the
construction or development loan minus one. For example, if the loan's expected
life is 18 months, then the number in this field must be 17 or less.
Land Development Loans
You can select the Draws &
Repayment panel on the Pricing Opportunity
page to set up the draw schedule. When you enter values, the Save and
Cancel buttons become active.
For land development loans, the loan officer must build an estimated repayment
schedule. Four additional repayment fields appear:
-
Repayment Begins Month
-
Initial Repayment
-
# of Additional Repayments
-
Additional Repayment
Note: For these loan types, the
Projected ROE and the Rate to Meet Target
ROE loan profitability calculations are not calculated until after you define
the Draws fields.