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 Paying Off a Loan Early

Use

This function groups together the functionality of the business object Early Payoff .

You can carry out the following steps for the early payoff of a loan:

  • Enter

  • Delete

  • Activate

  • Deactivate

  • Execute

  • Reverse

Prerequisites

You have made the settings for the early payoff in the following IMG activities in Customizing for Account Management (FS-AM ):

  • Start of the navigation path Basic Settings Next navigation step Business Transaction Categories Next navigation step Edit Descriptions of SAP Business Transaction Categories End of the navigation path

  • Start of the navigation path Order Management Next navigation step Basic Settings Next navigation step Configure Order Category End of the navigation path

  • Start of the navigation path Order Management Next navigation step Early Payoff End of the navigation path

    • Define Number Range Interval for Early Payoff

    • Define Payoff Reasons

    • Assign Account Closure Reason to a Payoff Reason

    • Define Deactivation Reasons for Early Payoff

    • Define Reversal Reasons for Early Payoff

    • Define Display of Change Documents

      Release :

    • Assign Release Procedure to Release Object

    • Start of the navigation path Release Next navigation step Assign Rule to Release Steps End of the navigation path

    • Start of the navigation path Release Next navigation step Assign Release Procedure to Release WF and to Release Procedure WF End of the navigation path

You have also made the settings for the objects generated by the order in Customizing for Account Management (FS-AM). For more information about the generated objects, see the Integration section in Early Payoff .

Activities

From the SAP Easy Access screen, choose Start of the navigation path Account Management Next navigation step Account Next navigation step Loan (Special Functions) Next navigation step Early Payoff. End of the navigation path

In the initial screen you can choose one of the following three functions:

  • Create

  • Change

  • Display

The system runs checks for the following methods:

  • Activate

  • Deactivate

  • Reverse

For more information about the checks, see the Integration section in the documentation for Early Payoff . You can also define these methods for the release process. For more information, see Release Object: OR_PAYF (Early Payoff) .

Entering an Order

Entering a Full Payoff Order

  1. To create a new order, choose Create or Show New Creation Area in the initial screen and enter the data for creating an order. The system automatically creates an order number.

  2. Enter the necessary data on the Payoff tab page (see the Integration section in the documentation for Early Payoff ).

  3. The system enters the value date and the date of the customer request from the account master data by default. If an insurance policy is assigned to the account, the system also determines the rebate amount for the insurance policy.

    The system recalculates the cash flow and determines the gross payoff amount.

  4. Choose Save to enter the order. The order now has the status Entered .

    Entering the order does not affect the cash flow or the master data for the account.

    Entering a Partial Payoff Order

  5. To create a new order, choose Create or Show New Creation Area in the initial screen and enter the data for creating an order. The system automatically creates an order number.

  6. Enter the following data on the Payoff tab page

    • intended due date of partial payoff (can be present or future date)
    • the net partial payoff amount
    • the sum of open items as on the due date of the partial payoff (the option to include open items in the partial payoff amount can be controlled at the product level)
    • behavior of payment plan change (the default behavior is defined at the product level and the borrower will be given the option to override the same through the payoff order)

The user will also have the option to charge the customer with event-based payoff charges through the order.

The system calculates the gross partial payoff amount and displays it on the screen.

  1. Choose Save to enter the order. The order now has the status Entered .

    Entering the order does not affect the cash flow or the master data for the account

Deleting an order

  1. Enter the order number in the initial screen for the function to process an order. Choose Change.

  2. Choose Delete.

    You can only delete orders with status Entered .

    The system checks whether it is possible to delete the order.

  3. The system sets the status of the order to the final status Deleted . You can no longer process the order.

Activating an order

  1. Enter the order number in the initial screen for the function to process an order. Choose Change.

  2. Choose Activate .

    The system executes the same checks that it runs when an order is entered.

  3. Once you have saved the order, the system sets the status to Activated. In this way a payoff quote is created. You can send this by correspondence to the borrower to inform him/her of the exact payoff amount to be paid. The system also gives a payment directive to the payment distribution system so that it recognizes an incoming payment as a payoff amount and informs the system accordingly.

    You can continue to make changes to the order provided that it has the status Activated because no postings are made while the order has this status. You cannot delete this order. However, you can deactivate it or execute it.

Deactivating an order

  1. Enter the order number in the initial screen for the function to process an order. Choose Change.

  2. Choose Deactivate . The system checks whether it is possible to deactivate the order.

  3. Choose Save .

  4. The system sets the status of the payoff to Deactivated and deletes the payment directive in the payment distribution system. If requested, the system triggers correspondence with the borrower.

Executing an order

The execution can be triggered in the following ways:

  • By the payment distribution system automatically

    The payment distribution systemtriggers the execution of the early payoff when an incoming payment is made by the borrower within the validity period after the order has been activated, in other words, on the basis of a payoff quote.

  • Manually by the loans officer

    You can also execute the order directly by setting the Immediate Execution of Early Payoff indicator. When a corresponding incoming payment is made the payment distribution system transfers the payoff amount to the loan account directly and the system no longer needs to execute the order separately.

    Executing a Full Payoff

To execute a full payoff order the system completes the following steps:

  1. It runs the necessary checks again.

  2. It recalculates the cash flow to determine the gross payoff amount including all costs incurred. It also triggers a calculation of the insurance premiums if an insurance policy is assigned to the loan account.

  3. It schedules the items that have actually been created for account billing so that the open item management system can create an open item after the account billing run.

  4. It triggers notice of cancellation of the insurance policies assigned to the loan account, provided that these are only valid with the account. For more information, see Canceling Insurance Policies .

  5. It schedules the closure of the loan account according to the product settings.

  6. If requested, it triggers correspondence with the borrower.

  7. It sets the order status to Executed .

You can reverse an executed order.

Executing a Partial Payoff

To execute a partial payoff order the system completes the following steps:

  1. The system runs the necessary checks again.

  2. It creates payment condition for repayment with due date as the value date of payoff.

  3. It creates a payment plan change order to change the installment amount or the end of term as the case may be.

  4. It creates payment item for payoff charges, if applicable.

  5. It creates payment item for third party prepayment penalty, if applicable.

  6. It sets the order status to Executed .

You can reverse an executed order.

Reversing an order

An order can be reversed in the following ways:

  • By the payment distribution system

    If the payment distribution system reverses an incoming payment (due to an incorrect posting, for example) it automatically triggers the reversal of the payoff order.

  • By the loans officer

    This step is only possible if the order has been flagged for an immediate payoff. Enter the order number in the initial screen for the function to process an order and choose Reverse .

Reversing a Full Payoff Order

To reverse a full payoff order the system completes the following steps:

  1. The system runs the necessary checks and determines the order data.

  2. The system resets the following steps:

    • It reverses the closure of the loan account if this has already taken place.

    • It rescinds the notice of cancellation of the assigned insurance policies.

    • It resets all of the calculation results in the cash flow caused by the early payoff.

    • It triggers the creation of a payment order, so that the total of the reversed amounts are transferred from the loan account back to the clearing account.

    • If requested, it triggers correspondence with the borrower.

  3. The system sets the status of the order to the final status Reversed .

Reversing a Partial Payoff Order

To reverse a partial payoff order the system completes the following steps:

  1. The system runs the necessary checks and determines the order data.

  2. The system resets the following steps:

  3. It reverses the payment plan change if this has already taken place.

  4. It deletes the payment condition that was already created.

  5. It reverses the payment item for charges, if this was already created.

It reverses the payment item for third party prepayment penalty, if this was already created. When you reverse a disbursement, the system does not delete the associated account event.