Background documentationABS/MBS: Retrospective Changes to Repayments

 

When the issuer of an ABS/MBS position publishes a respective change to a factor for repayments that have already been posted, you can reflect this change in the system.

Prerequisites

In the Customizing activity Define Tranche, you need to allow retrospective changes to repayments. You also need to create the required update types and make the necessary settings. See also: ABS/MBS: Customizing

Activities

  1. Create a new redemption schedule.

  2. Select the completed repayment that you would now like to change and choose the Change (Change) pushbutton in that row.

    The system issues a message telling you that the factor has already been fixed.

    To make the retrospective change, choose Adjust.

  3. Enter the changed values for the repayment.

  4. Save your entries.

  5. The system then creates the following adjustment flows for the nominal amount:

    • A flow that writes off the previous nominal amount

    • A flow that posts the new nominal amount (resulting from the changed redemption schedule).

    For changed interest payments, only one adjustment flow is created. However, this flow does not change the book value because it is not connected to any payment. In the next interest payment, the issuer takes into account the effect of the change on interest amounts. With the next amortization/valuation, the book value is adjusted on the basis of the new redemption schedule.