KEY TAKEAWAYS FROM COLLECTION AND RECOVERY PROCESS DATA IMPROVEMENTS
- We have now developed and implemented the reporting system to reflect the write-off amounts for each payment and claim in our collection and recovery process. This way investors can see both gross and net payments. Until today it was only possible to see the net payments and gross claims as write-offs were handled outside the system.
- Write-off is any amount deducted from gross cash flow received in respect of delinquent loans or reductions of principal and secondary claims (interest, penalties). Write-offs are applied to the gross cash flow received from the debtor or the gross claim calculated by the system. This reduction of cash flow is already projected in the loan interest rates and therefore expected returns via lower recovery rate assumptions. Expected recovery rate has been calculated on net, not gross cash expected to be received.
- Write-off means that the amount expected to be received from the debtor is reduced and the debtor is not requested to repay this amount. It does not typically mean a loss in itself as the respective debtors make payments often in excess of the capital invested. Cases that go through formal bankruptcy proceedings are exceptions to this.
FULLY PAID OFF LOANS WILL NOW BE WRITTEN-OFF AND REMOVED FROM YOUR ACTIVE PORTFOLIO
Loans that have been fully repaid under settlements but where the reductions of the claim are not reflected in our system will be shown as repaid. Deductions made in accordance with the settlement will be shown as write-off together with the reason for such write off. For most of these cases the principal and initial planned interest has been recovered fully and reductions are done from the overdue interest. Usually these cases are the ones where there was a settlement with the debtor (for example the debtor has asked for interest reduction) or where bankruptcy cases have ended. These cases (currently shown in Write-off stage) will be updated in the system over the coming months and closed.
PARTIAL WRITE-OFF WILL BE SHOWN FOR EVERY PAYMENT
Write-offs on delinquent loans in active collection or recovery are shown in the loan schedule as payments come in. Fees will be deducted only from the overdue payment if the borrower recovers fully and makes next repayments on deadline. Data from April has been input to the system and data on new partial write-offs is populated automatically.
WHERE TO LOOK UP THE LOANS THAT HAVE BEEN WRITTEN-OFF?
WRITE-OFF-S ARE REFLECTED IN THE FOLLOWING PRIVATE REPORTS:
- Income Report (column names WriteOffPrincipal, WriteOffInterest and WriteOffPenalties)
- Monthly Overview (row names WriteOffPrincipal and WriteOffInterest)
ADDITIONALLY YOU CAN SEARCH THE WRITE-OFFS FROM THE FOLLOWING PAGES:
- Cash flow (added extra columns and graphs. You can set these up from the settings.):
- Investments (possibility to add extra columns from the settings and use search filters for looking up the loans where write-offs have occurred):
- Secondary Market (possibility to add extra columns from the settings and search the write-off amounts from the loan schedule and collection events):
- Dashboard (principal balance will reduce as much as the write-off for principal amount was)
INVESTORS HAVE EVEN BETTER OVERVIEW OF THE STATUS OF THEIR PORTFOLIO
To conclude, the improvements made to the collection and recovery process gives you the overview of the exact amounts that has been written-off as well as the reason behind the final write-off, e.g. paid off according to judgement, abatement of bankruptcy etc. You can use this information either for planning the future cash flow of your portfolio or making decisions on purchasing from the secondary market.
Please note that cash (principal or interest) received should not be further reduced by write-offs as these have already been deducted from there. Adding together write-offs and net cash received will allow you to see the total gross cash flow.