CU*BASE Rate Control

This discussion is intended as a high-level overview of how rates are maintained and controlled on the CU*BASE system.

SAVINGS

· No rate is stored at the member level; dividends and interest are calculated from a central system control called a Dividend Application.

· Rate maintenance is done using the Member Rate Maintenance feature which controls rates for both share and certificate products (Tool #506: Member Rate Maintenance (Shortcut: ratemaint)). It is not possible to enter rates directly into the Share Dividend Application configuration screen. The Rate Maintenance system:

· Displays all share products in a list format, to allow comparison between products and the ability to update all rates at once.

· Allows rate changes to be scheduled in advance, then automatically changed during daily processing as of the assigned effective date.

· Records a history of all rate changes made to each share product.

· Includes an APY Calculator feature to assist in determining rates.

· Allows for the creation of Procedures and Marketing Tips that can be used as sales and member service tools by all CU*BASE users from Rate Inquiry.

· Rate changes for all share products as a whole can be controlled by defining a Credit Union Rate Change Tolerance range. This is designed only to prevent obviously wrong rates from being entered accidentally, such as 73% instead of 7.3%. There is one tolerance range used by all share dividend applications.

CERTIFICATES

· New certificates and existing certificates have separate rate control features.

· Rates for new certificates are assigned from a central control system called the Certificate Type code.

· Rate changes for all certificate types as a whole can be controlled by defining a Credit Union Rate Change Tolerance range. This is designed only to prevent obviously wrong rates from being entered accidentally, such as 73% instead of 7.3%. There is one tolerance range used by all certificate types.

· When a new certificate is opened, the rate from the Certificate Type code is used as the default. The user can override with no viability test except for general Rate Change Tolerance ranges.

· When the certificate account is created, the rate is recorded on the MEMBER3 record. It is this stored rate that is used in the accrual process.

·For non-variable rate certificate products, rate maintenance is done using the Member Rate Maintenance feature (Tool #506: Member Rate Maintenance (Shortcut: ratemaint)). It is not possible to enter any rates on the actual CD Type configuration screen. The Rate Maintenance system:

· Displays all certificate products in a list format, to allow comparison between products and the ability to update all rates at once.

· Allows rate changes to be scheduled in advance, then automatically changed during daily processing as of the assigned effective date.

· Records a history of all rate changes made to each certificate type.

· Includes an APY Calculator feature to assist in determining rates.

· Allows for the creation of Procedures and Marketing Tips that can be used as sales and member service tools by all CU*BASE users from Rate Inquiry.

·For variable-rate certificate products, rate maintenance is done using the CD Variable Rate feature (Tool #192: CD Variable Rate Configuration). This system:

· Allows a Variable Rate code to be configured and assigned to individual certificate accounts.

· Allows a rate change to be scheduled for a CD Variable Rate Code. On the scheduled date, the rate is then changed on the MEMBER3 record for all certificates with that Code.

·For all certificate accounts, rate maintenance can also be done directly to the individual certificate account record using Update Member Account Information (Tool 20: Update Account Information (Shortcut: acct)).

· Dividends are monitored (accrued) and posted (paid) during beginning-of-day (BOD) processing. This means that dividends accrue for the day of withdrawal (maturity date) but not the day of deposit (open date) on certificate products.

LOANS

· Like certificates, loan rates are controlled separately for new loans and existing loan accounts.

· Rates for new loans are assigned from a central system called the Loan Category code. This code contains the basic controlling configuration for how all loans of this type should behave, from interest accruals and payment changes to other servicing parameters.

· In addition, a separate Loan Product configuration allows the CU to break down a single loan category (such as “Installment Loan”) into multiple loan products to offer to members (such as “New Auto Loan,” “Used Auto Loan,” etc.). Loan Product codes are used by the following CU*BASE systems:

· Rate Inquiry, available from the Home Page

· Online Banking loan “Rate Board”

Rates set up in the Loan Product code must be within the rate range specified by the associated Loan Category code.

· Rate changes for loan products have several controls:

· The Loan Category code contains a high and low rate control range for each individual loan category. This range is used in a viability test when rates are entered on individual new or existing loan accounts.

· Optional Amortization Defaults can be set for each loan product to set the default rate to be used for new loan accounts. This rate can be overridden by a user when the loan account is set up; the altered rate is checked against the range on the loan category code (viability test).

· Rate changes to Loan Category, Loan Product, and Loan Variable Rates are controlled by a Credit Union Rate Change Tolerance range. This is designed only to prevent obviously wrong rates from being entered accidentally, such as 73% instead of 7.3%. There is one tolerance range used by all loan types.

· In the loan creation process the rate is stored in either the MEMBER5 (closed-end) or the MEMBER6 (open credit) loan record. It is this stored rate that is used in the accrual process.

· Loans also have a variable rate process. It is much more intense and feature-rich than certificate variable rates.

Understanding Loan Variable Rate Products

Catalyst for Change:

1. Automated process that tells the system to change the rate of an existing loan. Controlled by the Loan Variable Rate Code. Rate changes are scheduled in advance, then monitored and implemented automatically as part of the daily cycle.

2. Payment Change processing - a special type of variable rate processing for LOC products that have payment recalculation. Generally, the system will compare the loan and its variable rate code to the existing rate at the time of payment recalculation (catalyst = loan disbursement) and change the existing rate to be equal with the coded rate.

Types of Variable Rate Codes:

1. Group codes - These codes represent a group of loans whose rates change because they are tied to the group. The change is scheduled by the credit union user, and all loans change to the same rate.

2. Contract codes - These codes are written to be independent of each other by loan note. While they may all be tied to the same rate or rate formula, the timing and other basic controls of the change are based upon the individual loan.

3. Update codes - These codes actually change the variable rate code attached to the loan account, thereby moving control of the rate from one variable rate code to another. Therefore the loan might have more than one type of variable rate formula over its life (such as fixed introductory then quarterly variable). The process for the change is automated.