Introduction to Lending

The lending products in Temenos Transact have been enhanced with these unique features, which are prevalent in Hong Kong market.

Loan Purpose Codes

Hong Kong has specific purpose codes which are selected during the opening of a loan. Provision is provided for users to select the appropriate loan purpose code during creation of the lending limit and the actual loan.

Loan Disbursement Processing

This module provides the flexibility for customers to get their loan disbursement amount via various methods such as cashier order, direct credit to a customer savings/current account, CHATS/RTGS, outward remittance and China-HK Express link.

Interest Rate Comparison

Multiple types of loan interest rate structure is allowed for comparison before a loan is taken. The various interest rate structures include – prime rate, fixed rate, preferential rate, judgement rate, floating rate based on index (LIBOR, HIBOR, etc), base rate linked with spread (e.g. LIBOR +3%), based on pledged fixed deposit rate and composite rate. Up to 7 interest rate structures can be compared along with comparison rules such as minimum, maximum and average.

Automatic Update Of Periodic Interest

Certain types of loan contracts may have a periodic rate of interest. In cases where the disbursement has been done before the update of the base rate, Temenos Transact has the capability to re-calculate the effective date so the latest interest rate is applied.

Rule of 78

The “Rule of 78” is the method most banks use to break down the principal and interest in the monthly repayment of an instalment loan. Under this rule, the proportion of interest in the monthly payments decreases over the course of the loan period. Rule of 78 can be achieved with the AA lending modules in Temenos Transact.

Penalty Interest Rate Based on the Contract Rate

Penalty interest is applied when customer defaults an obligation in payment. One of the method in which penalty interest is calculated is based on contract rate itself. A margin is applied on the contract rate to derive on the penalty rate. This type of calculation however is not applicable if contract rate definition is flat rate (Rule78) or tiered (level/band).

Payment Schedule Amendments

When the interest rate increases or decreases or when a customer makes a prepayment, Temenos Transact has the capability to either recalculate the term or installment amount. In addition to this, Temenos Transact also allows the bank to fix a maximum term. In such cases, during recalculation of the term, the term is restricted within the maximum limit.

Payoff/Prepayment

Temenos Transact provides the option to apply penalty charges on a payoff and prepayment. Payoff notices can be generated for a customer during the payoff request. An option to adjust the projected overdue interest, early payoff charges and commission/rebate drawback is presented to the user. On the payoff date, the instruction is automatically processed, provided a settlement account is available.

Mortgage Linked Accounts

Various countries have initiatives in place to give citizens access to affordable housing. As such, financial institutions are encouraged to provide various incentives and other schemes to citizens for the financing of such housing.

In Hong Kong, apart from subsidies provided on mortgage loans, financial institutions also provide incentives by the way of bundled products with mortgage loans. This enables a customer to save, while availing of finance for the purchase of property. Such savings accounts, linked to a mortgage loan, is usually associated with a preferential interest rate as opposed to the prevailing rate for savings accounts.

Mortgage Insurance Program

Banks in Hong Kong have to comply with loan-to-value ("LTV") guideline on residential mortgage lending. However, banks can provide mortgage loans for more than LTV without incurring additional credit risk by enrolling for Mortgage Insurance Programme (MIP) with the customer paying the insurance premium. Temenos Transact supports the collection of a single premium for a MIP loan on the loan disbursement and collection of subsequent annual premiums based on annual disbursement date.

Home Purchase Loan Scheme (HPLS)

HPLS provides interest free or monthly subsidized loans to eligible, prospective borrowers, who are housed in residential properties as tenants. This loan is taken through a bank, wherein a portion of the loan is subsidized, and the other portion of the loan is financed by the bank. This is registered in the books of bank as two loans – one subsidized under HPLS and other financed by bank. Temenos Transact facilitates the prevalence of two loans, with certain controls such as payments from the same account, matching tenures of the loan, and so on.

Asset Classification

Temenos Transact provides robust asset classification processing of loans and accounts.

Subsidy Processing

Temenos Transact is enriched with the processing of subsidized loans involving government subsidies. The types of mortgage loan schemes supported are HPLS (Home Purchase Loan Scheme) and HLISS (Home Loan Interest Subsidy Scheme.