New Years Resolution

by Michael Shohoney January 7, 2010 05:33
I'm not one that makes New Years resolutions very often as I see them as a formula for failure because we always set goals that are unrealistic.  However, as I sat down and assessed Math Corporation's 2009, I saw one glaring issue that needed to be addressed for improvement in 2010 and that was my own performance in blog posting here, on Twitter and Facebook!  So, as I sit here, I resolve that I will try to be more regular in my blog postings going forward.  We would still love to have input from you, our users, for blog postings and would love to have submissions that we would post.  So, if you have something you would like to see addressed, let us know!  Here's to a great 2010 for us all.

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Silverlight!

by Michael Shohoney May 27, 2009 11:29
Math Corporation is announcing the addition of a new version of our component products.  We now have Silverlight versions available for distribution.  If your current or future development plans include Silverlight, contact us for further information.

Facebook

by Michael Shohoney May 12, 2009 09:51

Well, I am long overdue for a posting to this blog.  I'm sure all of you know how it goes when you get swamped by a project or two or three or....  Anyway, it's tough to find a few free moments.  I will have to try to be better about my responsibilities out here.

Our newest news is that we now have a Facebook page.  We invite you to view it at Facebook.  Just search us out and become a fan.  Let us know if you have any troubles finding it.


An Interesting Development

by Michael Shohoney March 24, 2009 10:55

There has been an interesting development in lending that is borne of this economic crisis we're in.  What is it?  It it borrowers that take an FHA loan even if they have a sufficient loan-to-value ratio.  What does this do?  It requires that they pay the funding fee and mortgage insurance premiums for a minimum of five years.  This is certainly an expense that most borrowers avoiided if they had at least an 80% loan-to-value ratio.  However, since some lenders are only allowing FHA originations, borrowers are being forced into this added expense if they want a loan.  In a future post, we will be showing you how to use eZMath and ZMath to originate loans with mortgage insurance, including FHA.


Balloon Loans

by Michael Shohoney March 2, 2009 10:09

A question that we often deal with is how to structure balloon loans.  In a future post, we will look at how to mechanically structure balloons using eZMath and ZMath.  In this post we are going to discuss the different types of balloon loans and how they are structured.

 The first type of balloon loan is the type where a customer would like to pay a certain amount per month and the balance remaining on the loan with the final payment.  In order to have a balloon (i.e. a balance remaining at term), the desired payment must be less than the regular payment amount that would be calculated given the other terms (i.e. interest rate, term and amount) of the loan.  At the same time, it is usually essential that the payment amount desired by the borrower be enough that amortization (i.e. balance reduction) is occurring.  If those two criteria are met and a lender's policy will allow balloon lending, then the loan can be structured in this way.

 The second type of balloon loan is the type where the customer would like a certain amount of the loan to be left remaining (i.e. unamortized) at term.  That remaining balance will be paid with the final payment.  What occurs with this type of loan is that once the final balance is determined or set by the borrower, the regular payment amount is calculated.  That payment amount is made for one less than the number of payments in the loan and the final payment is the balance remaining plus the regular payment amount.  These types of balloons are often used when the borrower is expecting some kind of cash flow that coincides with the final payment of the loan (i.e. sale of the collateral, etc.) and the balance remaining equals or is slightly less than that cash flow.

 The final type of balloon loan is the type where the term upon which the payment amount is calculated (the amortization term) is less than the actual term of the loan.  We call this a prepay balloon.  This is the type of balloon loan that we commonly see in mortgage lending.  Sometimes it is termed a "X/Y Balloon Loan" where X is the amortization term and Y is the actual term (i.e. 30/7 Balloon Loan).  In this type of balloon, the payment amount is calculated based on the amortization term.  That payment amount is made for the number of payments in the actual term.  The resulting balance at term is paid in full (or refinanced) with the final payment.

That summarizes the types of balloon loans seen in the lending industry.  Our loan calculation software packages, eZMath and ZMath, easily calculate all three types.  In a posting in the Calculators 101 section in the next few days, we will look at how to structure each type.  In the mean time, if you ever have any questions on subject matter or the mechanics of running our software, please feel free to contact us.


Options and Variations

by Michael Shohoney January 26, 2009 09:37

Okay, you've set your defaults and you've selected your loan type.  Now what?  Well, unless everything is set exactly the way you want it and you know that for sure, we suggest that you look at the Options and Variations screen.  You can do this one of two ways.  First, if you check the box at the bottom of the Loan Type screen and click Submit, you will be taken to the Options and Variations screen before you're taken to the entry screen.  If you do not check the box, you can access the Options and Variations screen by click on that tab from the data entry screen.

Once you're in the Options and Variations screen, you can choose to change a few of your defaults, if necessary, on a loan by loan basis.  Or, you can use this screen to add features to your loan.  Let's look at what defaults we can change first.

1.  Interest Type--You can change from simple to Add-on or discount, if applicable.  This is highly unlikely but is there in case you need it.

2.  Basis--You can change the accrual basis.  This is probably the most used of all of these.

3.  Odd Interest Adj--This would be the second most popular default change.

4.  Prepaid basis

 Now let's look at the loan features that we can change.  I will list all of them here.  Each loan type is set up to prohibit selection of any options that do not apply to that particular loan type.  So, if you do not see one listed in your screen, that means that that option is not available for your loan.

1.  Balloon--Select this if your loan has a balloon payment.

2.  Construction--Select this if your loan has a construction phase.  This can be construction only or construction permanent financing.  All calculations will be done as documented by Appendix D of Regulation Z.

3.  Insurance--Select the appropriate insurance type if your loan has insurance.  We offer standard credit life/accident and health (i.e. disability) insurance, private mortgage insurance, FHA MIP and VA insurances.

4.  Accelerated--Select this if your loan is going to be structured as an accelerated biweekly or weekly payment loan.  An accelerated biweekly (or weekly) loan is a loan where the standard monthly payment is divided by two (or four for weekly) and the resulting payment is collected every two (or four for weekly) weeks.  A new term is calculated based on the new payment amount.

5.  Buydown--If your loan has an interest rate buydown feature, select this.

6.  Skipped Payments--If you loan has payments that are skipped each year, select this option.

7.  Differing Freq.--This is an highly unusual option but it allows the interest and principal of the loan to be paid on differing frequencies or on different dates.  This is usually used in commercial lending.  For example, interest may be due monthly but principal is due quarterly.

 Once you have selected the options and variations that apply to your loan (yes, you may choose more than one at a time), click on OK and you will be taken to the data entry screen.  If applicable, more panes (i.e. data entry areas) will be displayed to take the information for each of the options you've chosen.  In future postings I will discuss the data entry process and look at each of the options.


Welcome to Math Corp.'s Blog

by Michael Shohoney December 3, 2008 07:01
Today we start a new era at Math Corporation by opening a blog.  We intend to use our blog to provide current information on our products, their pragmatic use, industry news and trends and regulatory issues and their solution using our products.  We invite our web site visitors to share their views with us by using the Contact tab at the top of the page.  If you have an idea for a post or would like to comment on a post please send it to us.  We hope to make this area an exchange of great ideas and we're going to count on your participation.  Here's to blogging!

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