Whatchamacallit
TMNA wants to push the sales of the Lexus Nx in order to get them off car lots and make room for the new Lexus Tx. In order to do this, they created a program during 'December to Remember' to offer a lower rate than TFS' buy rate. Tony wants to buy a Lexus Nx to tote his wife and 2 kids along, so he goes to his local Lexus dealership and signs a 48 month loan agreement that is financed through TFS. Based on Tony’s tier, he would normally qualify for a 4% rate, however because of the December to Remember program, his contract rate is set at 3%. TMNA will help TFS to cover the cost of the rate differential. What is the name of this process?
Rate subvention - contract rate is signed at a lower rate than buy rate. TMNA covers a portion of this money that TFS loses out on. Similarly, MNAO offers subvention on MFS contracts.
True or False: Our team uses Power Query to complete several of our CONETs/SEC reporting deliverables.
True - VIE, Aging by Vintage, MIT, Charge Offs by Origination Year, etc.
Rate subvention, dealer participation, buydown, military rebates, flat fees, IDC, special marketing programs, payment waivers, cash subvention, and GSFS (Gulf States Financial Services) are all considered __?__.
Origination fees and costs
What are the two product codes BPSFS finances?
FRTM - Marine, FRTPS - PowerSport
Patricia heads to Turbo Tires Toyota Dealership to buy the latest and greatest MY25 Sienna. The loan is financed through TFS and due to her impeccable credit score and other factors her buy rate is set at 1%. However, due to current market conditions and supply/demand, Turbo Tires is able to have Patricia sign her contract at 3%. Patricia now pays TFS her monthly installment amount which includes the 3% interest. Because Turbo Tires was able have Patricia sign her contract at a rate higher than what TFS offered, they are entitled to receive that 2% rate differential back from TFS. What is the name of this process?
Dealer participation - dealer gets contract signed at higher rate than TFS buy rate. There are 3 participation plans a dealer can sign up for:
Plan A - dealer is paid 75% of the calculated participation up front. If account pays off/defaults prior to customer making 3 payments or 60 days elapsing from origination due date of first payment, TFS will charge back the entire 75% reserve previously paid to the dealer.
Plan 1 - dealer is paid 100% of the calculated participation up front. If customer defaults at any time, dealer pays back 100% of participation. If customer prepays loan in full, dealer pays back only the portion of dealer participation that is unearned in Shaw.
Plan B - used for TCPR dealers. Dealer is paid 70% of calculated participation up front. If charge off or payoff within 6 months, dealer is charged back 70%.
What is the name of the system that performs amortization on a loan level basis for the various origination fees and costs (subvention, IDC, buydown, military rebate, etc.)?
One Sum X (OSX)
True or false: Under IFRS AR aged over 120 days is written off.
False
At what point do loans move into non-accrual status under TFSB banking regulations?
Bonus Question: Does a customer know when they are moved into non-accrual status?
90 days - called RBA (Regulatory Bank Accounting) status
No
Gerard has a bad month. His girlfriend breaks up with him, he loses his job, and he totals his LC500 by crashing into a tree because he was texting while driving (though he comes out unscathed). Now he needs something to get him to and from work. He heads to his local dealership to buy a Mazda 3. The car is financed through MFS, and due to current market conditions MFS is offering Mazda 3s at a 6% buy rate for customers with Gerard's tier. Bob, the salesman at the dealership, feels bad for Gerard. He also wants to get this Mazda 3 off his lot because it's been sitting there for months. So he decides to offer a lower contract rate of 5% for Gerard. Now the dealership owes that 1% rate differential back to MFS. What is the name of this process?
Buydown - dealer offers lower contract rate than MFS buy rate
When a TFS/PLG (MFS & BPSFS) customer sends in their payment, how does Shaw/Defi apply the payment?
Applies first to outstanding interest and remaining goes to principal balance
How are origination fees and costs treated from an accounting perspective?
Deferred and amortized over the life of the loan based on the effective interest rate.
True or False: For TFSB loans, once an account moves into 90 days past due (RBA) status any payments made on their account are recorded to principal only (until they come out of RBA status).
True
__?__ are an expense related to loan origination. There are three components of this which include:
1) Credit bureau - checking the credit score of the customer
2) Route one - 3rd party vendor that processes originating contracts electronically
3) Allocated salaries expense - salaries of employee whose time is spent originating loans
IDC (initial direct costs)
Janine is driving carpool this week in her Lexus GX. She picks up 6 kids from school and drops off 5 at their respective houses. She picks up 2 more from down the street and then goes back to her house. When she gets home, she takes the current principal balance of her loan and multiplies it by the contract rate and then divides it by 365 days. What does she calculate?
Per diem interest
__?__ are created when TFS sells a portion of its loans to a financial institution who then packages them into a portfolio to sell to investors. These packages issued are backed by the cash flows related to retail finance receivables and these types of packages appeal to income-oriented investors as they pay a steady stream of interest. Quarterly, we prepare a schedule that shows the total amount of AR that is pledged (in these packages) which is then presented in the 10-Q/10-K.
Asset backed securities (ABS)
How does a TFSB customer come out of RBA status?
First they need to bring the account current, then they need to make 6 consecutive payments on time.