If a fee is amortized via the straight line method, the amount of the fee to be amortized is divided by the total number of periods, and the periodic amortization transaction will be run for the resulting amount whenever called for by the fee amortization setup.

Examples

1. A $1,000 fee, amortized monthly over 12 months: The amortization transaction will occur once a month for the amount of $83.33.
2. A $1,000 fee, amortized daily over 12 months: The amortization transaction will occur daily for the amount of $2.74.

Description	Descriptive text to identify this amortized fees and distinguish it from any other amortized fees on the same loan.
Type	Set to Straight Line - Periodic.
Start Date	The first date on which the fee should amortize
Balance	The Amount of the fee to Amortize
Est. Bal. Transcode	The Establishing Transaction Code. Only transaction codes which meet the requirements for an Amortized Fee establishing transaction code will be available in this drop down list. Click to configure additional parameters. Note that Effective Date is not applicable to this amortization type.
Period	The frequency of the straight line amortization
Divisor	The total number of times that the fee will amortize straight line. The fee amount will be divided by this value to derive the periodic amount.
Amort. Fee Transcode	The periodic amortizing transaction code. Only transaction codes which meet the requirements for an Amortized Fee periodic amortizing transaction code will be available in this drop down list.
Periodic Amount	The amount that will be amortized during each periodic amortization.
NLS 5.12 and later Increase Payment Amount	This option is to be used when an amortized fee, such as an insurance premium, requires a separate billing (effectively increasing the payment amount). When selected, two separate billings will be generated; one for principal + interest and another for premium + interest. The establishing transaction code (e.g. Transaction Code 190) must be configured to increase the principal.

The custom method of fee amortization is the simplest (and also the least used) method by which to amortize a fee.

You simply specify the exact dates on which portions of the fee are scheduled to be amortized then you specify the exact amount to be amortized on each of those dates.

Description	Descriptive text to identify this amortized fees and distinguish it from any other amortized fees on the same loan.
Type	Select Straight Line - Custom.
Balance	The Amount of the fee to Amortize
Est. Bal. Transcode	The Establishing Transaction Code. Only transaction codes which meet the requirements for an Amortized Fee establishing transaction code will be available in this drop down list. Click to configure additional parameters. Note that Effective Date is not applicable to this amortization type.
Amort. Fee Transcode	The periodic amortizing transaction code. Only transaction codes which meet the requirements for an Amortized Fee periodic amortizing transaction code will be available in this drop down list.
Start Date	The date of the first amortization and calculation.

To schedule a date and amount to amortize a portion of the fee, click Add on the lower section of the dialog.

Period Number	Enter an identifying number for the period that you are defining.
Period Date	Enter a date on which you want a portion of the fee to be amortized.
Period Amount	Enter the amount that represents the portion of the fee that you want amortized.

Effective Interest Method is used to obtain the amortized amount based on the given parameters from actual interest paid.

The equation for this amortization method is:

Amortized Amount = Actual Interest Paid – Interest Calculated from Amortized Schedule

Where Interest Calculated from Amortized Schedule is the amortization schedule of the Principal Amount (Loan Principal Bal + Starting Balance) and Effective Interest Rate.

Description	Descriptive text to identify this amortized fees and distinguish it from any other amortized fees on the same loan.
Type	Select Effective Interest Method. Premium/Discount setting is only for classification purposes and does not affect the calculation.
Starting Balance	The amount of the fee to amortize.
Est. Bal. Transcode	The Establishing Transaction Code. Only transaction codes which meet the requirements for an Amortized Fee establishing transaction code will be available in this drop down list. Click to configure additional parameters. Note that Effective Date is not applicable to this amortization type.
Effective Interest Rate	The interest rate.
Amort. Fee Transcode	The periodic amortizing transaction code. Only transaction codes which meet the requirements for an Amortized Fee periodic amortizing transaction code will be available in this drop down list.
Use Loan Information	Deselect and enter the desired values to amortize on values different from the loan.

If a fee is amortized via the Effective Interest Method - Daily Accrual, the amortization of the fee will track with the interest accruals on the loan. For example: in an amortized loan, more interest tends to be realized up front while the principal balance is higher. A fee amortized by the effective interest method would amortize in proportion to this accrual of interest.

The equations and procedures for this amortization method are as follows:

Given that

x = total interest accrued life to date on the loan

y = total interest projected to accrue over the entire life of the loan based on history so far and projecting the payment schedule forward from this point to the maturity date

then

x/y = the ratio of the fee which should be amortized up to this point in time.

if

f = the amount of the fee to be amortized

then

f* (x/y) = the dollar amount of the fee that should be amortized up to this point in time.

if

a = the amount of the fee that has been amortized so far

then

(f * (x/y)) -a = the amount of the fee to amortize today.

The amortization period controls the frequency with which these calculations are run. Modifications, interest rate changes, advances, or principal reductions on a loan can cause drastic shifts to the factor “y” in the equations above and as a result when these calculations are run, the amount of the fee to amortize can jump greatly, or can even be a negative value. There is a checkbox to allow negative amortization, and if this is selected, the fee amortization will correct back to where it “should be” given the new and current conditions of the loan. If this checkbox is not selected, then the amount amortized will be zero each time until such time as the calculations yield a positive amount to amortize. Because the projection of interest “y” is always through the maturity date of the loan, by that date y will always equal x, and consequently the fee will always amortize in full on the first amortization date on or after the date of maturity.

Description	Descriptive text to identify this amortized fees and distinguish it from any other amortized fees on the same loan.
Type	Select Effective Interest Method - Daily Accrual.
Starting Balance	The Amount of the fee to Amortize
Est. Bal. Transcode	The Establishing Transaction Code. Only transaction codes which meet the requirements for an Amortized Fee establishing transaction code will be available in this drop down list. Click to configure additional parameters.
Amort. Fee Transcode	The periodic amortizing transaction code. Only transaction codes which meet the requirements for an Amortized Fee periodic amortizing transaction code will be available in this drop down list.
Amort Effective Date	The date from which to start amortizing. Interest accrued prior to this date is not counted in either “x” or “y.”
Interest Offset	This field is calculated automatically, and is the amount to be deducted from “x” and “y” based on the Amort Effective Date. It represents the interest that accrued prior to that date.
Expected Interest	Factor “y” in the above equations
Period	The period used to define the frequency of the amortization
Number of Periods	Used with period to define the frequency of the amortization. Example If period is set to days and number of periods is set to 5, the calculations above would be run every five days.
Start Date	The date of the first amortization and calculation.
Allow Negative Entries	If selected and the amount of the fee to amortize comes to a negative value, then that amount will be rolled back (un-amortized). If not selected and the amount of the fee to amortize comes to a negative value, then zero will be amortized.

If a fee is amortized via the principal/original balance pro-rata method, the amortization of the fee will track with the rate at which the principal balance on the loan is repaid. For example, when 20% of the original principal of the loan has been repaid, the fee will be 20% amortized.

The equations and procedures for this amortization method are as follows:

Given that

x = the total principal paid on the loan

y = the total principal advanced on the loan

then

x/y = the ratio of the fee which should be amortized up to this point in time.

if

f = the amount of the fee to be amortized

then

f * (x/y) = the dollar amount of the fee that should be amortized up to this point in time.

if

a = the amount of the fee that has been amortized so far

then

(f * (x/y)) - a = the amount of the fee to amortize today.

As long as no principal payments have been made since the last time the calculations were run, the amount of the fee to amortize will always come out to zero. Therefore, if it is your intention that a portion of the fee should amortize as soon as a principal payment is made, set the period for this setup to daily. A portion of the fee will always amortize during the nightly accrual process of any day on which there was a payment to principal.

Description	Descriptive text to identify this amortized fees and distinguish it from any other amortized fees on the same loan.
Type	Select Principal/Original Balance Prorata Method.
Starting Balance	The Amount of the fee to Amortize
Est. Bal. Transcode	The Establishing Transaction Code. Only transaction codes which meet the requirements for an Amortized Fee establishing transaction code will be available in this drop down list. Click to configure additional parameters. Note that Effective Date is not applicable to this amortization type.
Principal Offset	The amount to be deducted from the principal paid “x” and principal advanced “y” of the loan. Amortization beginning on the start date will be based on this adjusted principal.
Amort. Fee Transcode	The periodic amortizing transaction code. Only transaction codes which meet the requirements for an Amortized Fee periodic amortizing transaction code will be available in this drop down list.
Period	The period used to define the frequency of the amortization
Number of Periods	Used with period to define the frequency of the amortization. Example If period is set to days and number of periods is set to 5, the calculations above would be run every five days.
Start Date	The date of the first amortization and calculation.
Allow Negative Entries	If selected and the amount of the fee to amortize comes to a negative value, then that amount will be rolled back (un-amortized). If not selected and the amount of the fee to amortize comes to a negative value, then zero will be amortized.

If the loan’s Interest Type is set to Fixed Amortization, the principal paid for the above calculations is the amount of principal that should have been paid according to the amortization schedule. This means that the fee will amortize on the next opportunity to do so after a principal payment is due, even if that principal payment has not been made.