Financing a Fee

To follow this guide you'll need our lender fees module enabled. While this guide will walk through our Investments module options, it's not required. 

This guide will provide a workaround solution to those who want to finance a fee within an existing loan, whether it's a fee for points or any fee you'd like to finance and charge interest on over the life of the loan. 

This guide will strictly go over the process for accommodating this type of 'financed fee', if you have questions about module-specific processes, please review the full guide. 

1) Set up your Lender Fee

- Fee Name
- Description (Optional)
- Default Amount (Leave blank, you will assign the amount when assigning it to the loan. Or enter an amount if the Fee amount will be the same across all loans.)
- Set the fee to Accrue (This will allow us to pay the fee off as of the loan's closing date)
- Depending on your fee's scenario, you can assign the payouts of this fee to go to Servicer/Lenders/Split between Servicer and Lenders. Since this is a financing fee, we assume it'll all go to the Servicer.
- Set to 'Does not Recur' so we can pay this outside of a pay period's dues.
- Register Account Number can be any number of your preference to track this fee's credits/debits
- 'No' for adding to any new loans that are created
- Tax Options: If you have the Investments module you'll have extra options for including this fee on 1099 forms (although if the fee's proceeds all go to the servicer, this won't apply). 

Finish by clicking 'Add Fee Type'.

2) Create your Loan and Set a Fee Inclusive Loan Amount

From here, you'll want to create your loan and set it in service. When setting the loan amount you will want to factor in this financing fee's amount. Let's say the loan itself is $300,000 and the financed fee will be $6,000, you'll want to set the loan amount at $306,000.
If you have the investments module, make sure lenders have been assigned to fulfill the loan's 100% funding - where you'd assign yourself as a 'Servicer' for the $6,000 amount (create a contact with your company name under the organization field, to serve as the servicer placeholder). Once you've set your loan in service you'll assign this fee on that loan. 

Add the created financing fee as of the loan's closing date and set the loan fee amount ($6,000 in our example).
Note: Our example loan has a closing date of 1/17/24 and a prorate through 1/31/24. 

Click 'Save' to add the fee as of the loan's closing date. 

3) Record an 'Unscheduled Payment' to pay off the Financing Fee 

You'll want to delete the principal paydown amount and pay the Financing Fee by entering the $6,000 there.

Click 'Finish' to complete recording this Unscheduled Payment to pay off the lender fee. 

What we've essentially done here is note the financing fee was paid but is counted as part of the loan's principal balance. This is essentially what happens when your borrower opts for 'financing'. Note that interest will be charged on the principal balance and will follow the loan's rate.

Result

The result is the lender fee was paid to reflect on the loan's register and tax forms (1098/99s). The lender fee paid was seen as going to the 'Servicer' but is paid back by the borrower once the loan pays off. The two possible conflicting scenarios would be that this financing fee's "sub-loan" amount is charging interest at the same rate as the loan and the second issue would be if the loan pays off early they'll be paying the full fee amount (depending on your scenario - if you'd return money to the borrower).