La Hipotecaria

Mortgage portfolio data

Delinquency calculations

Methodology for delinquency calculations

Minimum Monthly Payment:

When a mortgage loan is originated by La Hipotecaria the borrower is obligated to pay one complete Minimum Monthly Payment (MMP) each and every month beginning no later than one month after loan disbursement.This date is defined as the Scheduled Payment Date. For example, if a loan is disbursed on January 19th, the borrower must make a complete MMP on or before the Scheduled Payment Date of February 19th.The MMP (or any amount above the MMP) may be paid at any time during the month and in as many installments as the borrower desires.

Additional note: When a mortgage is serviced by La Hipotecaria through Direct Discount or ACH, La Hipotecaria uses the following procedure: If a loan is disbursed between the 1st and 15th of the month, it processes a full MMP on or shortly after the first day of the month. If a loan is disbursed between the 16th and the last day of the month it processes ½ of an MMP on or about the first day of the month immediately following the disbursement and a full MMP on or about the first day of the month thereafter. No interest prorating is necessary since mortgages are calculated using Daily Simple Interest (explained below). Monthly Costs (explained below) are also not prorated but are only charged on the first day of each month beginning with the first complete month after loan disbursement.)

Composition of MMP:

The Minimum Monthly Payment (MMP) is comprised of: (i) The principal and interest payment required to fully amortize the loan taking into account the current interest rate and its scheduled amortization period, usually 30 years, and (ii) Monthly Costs related to the mortgage loan. These Monthly Costs include the following where applicable: a) Monthly servicing fee, b) Life insurance payment, c) Fire and casualty insurance payment, d) Unemployment insurance payment, e) Property tax impounds, f) Condominium maintenance fees, g) Other monthly government fees.

Daily Simple Interest Method:

All mortgage loans originated by La Hipotecaria are serviced using the Daily Simple Interest Method. La Hipotecaria will receive any payment in any amount at any time from a borrower. Payments received are first applied to Monthly Costs (in the order presented above) and second to pay accumulated interest up to and including the day of payment. Any payment received in excess is applied to reduce principal. Beginning the next calendar day, interest is calculated on the new loan balance.

Daily interest is calculated by multiplying the unpaid balance of the loan by the current interest rate and dividing by 365 days. Daily interest begins accumulating on the day the loan is disbursed and is calculated up to and including the day any payment is received. If the amount received is insufficient to cover the Monthly Costs and/or accumulated interest, these amounts not cancelled are carried forward and then reduced by the next payment received. All accumulated interest and Monthly Costs must be cancelled in the same order before any amount paid is applied to principal. No interest is charged on these amounts not cancelled.
(Additional note: Loan documentation permits the charging of late fees in the case of delinquent loans. However since La Hipotecaria uses the Daily Simple interest method and is always earning interest over the unpaid balance of the loan, regardless of the borrower’s delinquency status, rarely are late fees charged)

Scheduled Amortization:

On the day of loan disbursement, La Hipotecaria creates in its servicing system an amortization schedule establishing a Scheduled Monthly Balance designed to fully amortize the loan during the agreed upon loan term, usually 360 months. This Scheduled Monthly Balances takes into account the real number of calendar days in each month, the current interest rate and the actual date of loan disbursement in order to determine the principal and interest payment necessary to amortize the mortgage during the agreed upon loan term. The Scheduled Monthly Balance changes (diminishes) on each Scheduled Payment Date.

Should a rate adjustment occur at any time during the life of the loan, the servicing system automatically establishes a new Scheduled Monthly Balance, utilizing the real loan balance at the time of the rate adjustment and the remaining number of complete months in the originally agreed upon loan term. Neither accumulated interest nor Monthly Costs are considered as part of this loan balance and must be cancelled in full before any payment will be applied to principal.

Delinquency Calculation:

At any given moment, a client’s delinquency status is determined by the payment that must be received at that moment in order to cancel all accumulated and current Monthly Costs plus accumulated and current interest plus whatever is necessary to apply to principal so that the loan’s balance is equivalent to its Scheduled Monthly Balance on that particular date. This sum is called the Required Payment Amount or RPA. A client’s delinquency status is determined by using the following formula: (RPA / MMP) -1, rounded to the nearest whole number, but no less than zero. Delinquency Codes (or Delinquency Ranges) are as follows:

For example, if on a given date the sum of all accumulated and current Monthly Costs and accumulated interest of a particular loan is $364.23 and the real loan balance is $72.98 above its Scheduled Monthly Balance, the Required Payment Amount (RPA) is the sum of these two figures or $437.21. In short, if the client were to pay this amount, he would cancel all accumulated Monthly Costs, accumulated interest and the loan would be amortized to an amount equal to the Scheduled Monthly Balance. Assuming that the Minimum Monthly Payment is $167.22 the loan would be classified with a delinquency code of “2”. The calculations are as follows: $472.21 / $167.22 = 2.82; 2.82 – 1.00 = 1.82; 1.82 rounded to the nearest whole number is 2.00. The detailed delinquency report would distribute the RPA as follows:

Rate Adjustment Policies:

Although contained in the Company’s Servicing Manual, the following is an outline of the Company’s policy toward interest rate adjustments:

All mortgages serviced by La Hipotecaria have variable interest rates and may be adjusted by La Hipotecaria at any time without restrictions, except those provided by Law. Loan documentation prepared prior to August 15th of 2005 requires that La Hipotecaria notify a client of a pending rate adjustment 30 days prior to adjusting his rate. Loan documentation prepared after August 15th of 2005 specifies that rates may be adjusted at any moment without prior notification.

Regardless of the date of the loan documentation, it is the policy of La Hipotecaria to provide written notice to all borrowers of their rate adjustments in the form of letters delivered to the mortgaged residence. On mortgages whose loan documentation was prepared after August 15th of 2005, interest rates are adjusted simultaneously with the preparation of the notification letters. On mortgages whose loan documentation was prepared before August 15th of 2005, interest rates are adjusted thirty days after the preparation and delivery of the notification letter. It is the company policy that notification letters need not be received personally or accepted by the debtors of the mortgage. La Hipotecaria maintains a copy of each of these notification letters in the loan file in the home office of the company. The loan file is available to any borrower during regular business hours.

Although La Hipotecaria may adjust interest rates from time to time, every interest rate adjustment does not automatically trigger an adjustment in the actual MMP collected due to the collection methods utilized by La Hipotecaria and the logistics involved in frequently adjusting monthly payments. However, the real MMPs collected by La Hipotecaria must be adjusted when indicated under the policies described below.

Upon any rate adjustment (upwards or downwards), the proprietary servicing system of La Hipotecaria considers the new interest rate and the real loan balance at the time of the rate adjustment, and informs the user of the new MMP that would be required to amortize the mortgage during the remaining loan period. Depending on the change in the new MMP, the amount actually collected from the borrower is adjusted according to the following policies:

1. If the new MMP is less than the amount that is currently being collected monthly, the MMP collected is not changed unless specifically requested by the client. (By not fully adjusting downward the MMP, the mortgage begins to amortize at a rate faster than that which is required to fully amortize the mortgage during the remaining loan term).

2. If the new MMP is more than the current MMP actually being collected, the MMP collected is adjusted upwards only if the upward adjustment is more than the amount indicated in the following table:

Nevertheless, the MMP collected is always adjusted upwards when one of the following events occurs:

1. When the current MMP being collected over a period of time is insufficient to amortized the loan according to its amortization schedule and as a result Delinquency Code of the loan worsens, provided that such change moves the loan from a Delinquency Code of two (2) or worse.
2. When a there is a disbursement of a personal loan or second mortgage to be financed by La Hipotecaria. (Loan qualification for the personal loan or second mortgage considers the MMP required and not the MMP actually being collected.)
3. Any time that a rate adjustment would result in the non-amortization of the mortgage unless the required MMP were immediately collected.

Deemed Defaults

For reporting purposes, mortgage loans are deemed as “Defaulted” when any one of the following three events occurs:

1. Legal foreclosure proceedings are begun against any mortgage client, regardless of the loan’s delinquency range.
2 .The property guaranteeing the mortgage loan is accepted by La Hipotecaria through deed in lieu of foreclosure regardless of the loan’s delinquency range.
3. Any loan reaches a delinquency range of “7” or above (181-210 days), regardless of whether foreclosure proceedings have begun or not.