Spring · 2001 -- Volume 18 Issue 1
Contents
Effective Law Changes
Maryland
Effective: March 1, 2001 Law Type: Credit Insurance Single Premium Gross Coverage
Single Decreasing Life: $ .43/$100/yr. Joint Decreasing Life: $ .77/$100/yr. (180% of Sgl. rate) Single Level Life: $ .71/$100/yr. Joint Level Life: $1.28/$100/yr. (180% of Sgl. rate) Single Premium Net Payoff Coverage
Single Decreasing Life: $ .66/$1000/mo. Joint Decreasing Life: $1.19/$1000/mo. (180% of Sgl. rt.) MOB Coverage
Single Decreasing Life: $ .66/$1000/mo. Joint Decreasing Life: $1.19/$1000/mo. (180% of Sgl. rt.) Accident & Health 12 Month Rates
7 Elim: $1.42/$100 7 Retro: $2.13/$100 14 Elim: $ .99/$100 14 Retro: $1.56/$100 30 Elim: $ .57/$100 30 Retro: $1.21/$100
Iowa
Effective: April 1, 2001 Law Type: Credit Insurance The Insurance Division of the Iowa Department of Commerce has issued Bulletin 00-04 which revises prima facie credit insurance rates.
Credit Life Decreasing Rates
Single Decreasing Life: $ .45/$100/yr. Joint Decreasing Life: $ .75/$100/yr. Single Level Life: $ .82/$100/yr. Joint Level Life: $1.36/$100/yr. MOB Coverage
Single M.O.B. Rate: $ .69/$1000/mo. Joint M.O.B. Rate: $1.15/$1000/mo. Accident & Health 12 Month Rates
14 Elim: $1.15/$100 14 Retro: $1.81/$100 30 Elim: $ .66/$100 30 Retro: $1.40/$100 Joint A&H is 160% of the appropriate single A&H rate.
Oregon
Effective: April 1, 2001 Law Type: Credit Insurance Single Premium Gross Coverage
Single Dec. Life: $ .42/$100/yr.* - < 63 mo. Non-Under.
$ .65/$1000/mo.* - > 63 mo. Non-Under.
$ .38/$100/yr.* - < 63 mo. Under.
$ .59/$1000/mo.* - > 63 mo. Under
Single Level Life: $ .76/100/yr.* - Non-Underwritten
$ .68/$100/yr.* - Underwritten
MOB Coverage: $ .65/$1000/mo.* - Non-Underwritten
$ .59/$1000/mo.* - Underwritten
* Joint Life: 165% of Single Rate Accident & Health 12 month Rates per $100
14 Elim: $1.48 - Non-Un.
$1.33 - Under.
14 Retro: $1.79 - Non-Un.
$1.61 - Under.
30 Elim: $1.08 - Non-Un.
$ .97 - Under.
30 Retro: $1.65 - Non-Un.
$1.48 - Under.
Carleton Continues to improve......
Carleton PC SoftwareCarleton has taken the best loan origination software in the industry, PC95W, and made it better. Our software development staff took the thirty-five years of Carleton compliance computation experience and the suggestions from our customers over the last five years, and the result of their efforts can be seen in our latest loan origination product, Carleton 2000. This software includes several operational improvements to make it the most accurate, user friendly, reliable, and responsive payment quoting software available in the lending industry.
Carleton 2000's impressive features include:
- Carleton's $3 Million Compliance Warranty
- Calculates and discloses any type of loan with guaranteed accuracy and compliance, regardless of complexity.
- Computes Credit Life, A&H, Property, and IUI for all 50 states, the finest software yet for marketing Credit Insurance.
- Document & Forms Processing is an option. Designed to accurately print all required loan documents, loan contracts and credit insurance certificates, available in impact or laser versions.
- Produces refund values by the Rule of 78ths, Pro-Rata, Rule of Anticipation, and Actuarial methods.
- Supports Debt Cancellation contracts and Debt Suspension agreements.
- Supports 10 of the most prevalent time counting calendars in the computation of interest.
- Computes both U.S. Rule and Actuarial method APR values.
- Features are selected by the user to ensure compatibility with contract language, lending policy, and the filings of the creditor's insurance carrier(s).
- Carleton 2000 can be set up for multiple insurance carriers per creditor, creating custom parameters through the creation of custom case files.
- Offers the ability to label customized fees and place them in the proper fee category through the loan setup program.
- Carleton 2000 is covered by Carleton's $3 Million Compliance Warranty as part of its comprehensive Maintenance Program.
- Carleton 2000 is now available on CD-ROM. The software is a 32-bit application that can run on Windows NT®, Novell®, Citrix® and other network configurations.
Please visit our web site or call Ken Solnoky at (800) 433-0090, ext. 241 or email him at ksolnoky@carletoninc.com to learn more about this exciting new product.
Industry Exclusive: Carleton's $3 Million Compliance Warranty
Carleton is so confident in the capabilities of Carleton 2000 software and Carleton2000.Com that we now offer an industry exclusive $3 Million Compliance Warranty. We not only compute the numbers - we warrant the accuracy. All customers who purchase Carleton's Software Maintenance Package receive this warranty
This is an added measure of security that your loan origination calculations will be accurate and in compliance. For full details on this unique program, please contact the Carleton Sales Department.
Loan Origination on the Internet
Carleton 2000 SoftwareCarleton is proud to announce that we are bringing our 35 years of loan origination expertise to the Internet. Using Carleton 2000.com, all your clients or users need is access to the Internet to begin quoting your loans and producing your loan documents with the Carleton assurance that the loans will be accurate and in compliance. Carleton2000.com provides the same financial computational capability as our flagship product, Carleton 2000 PC. Additionally, the Carleton2000.com system makes it easy for your administrator to add or delete users as well as monitor user activity from our on-line Internet accounting system.
The Big Play - Connectivity
The Carleton2000.com has a connectivity module that will transfer the completed loan contract data directly to your administrative system eliminating the re-entry of data. Better service to your clients and the financial savings through connectivity, data entry elimination and major reduction in costly REDOS makes Carleton2000.com a bottom line winner.
Visit our demo site, www.Carleton2000.com, using Microsoft's Internet Explorer browser, to try out this exciting new product from Carleton. Give our sales department a call to find how we have already helped companies like yours put loan origination on the Internet.
Attention Credit Insurance Companies and Agencies
Carleton is pleased to announce we have put together a specially designed package of Carleton 2000 PC Software for the credit insurance industry. With the "insurance package" you have Carleton's 30 years of consumer credit lending experience working for both you and your clients. Don't hesitate; call (800) 433.0090 today for complete details on the "insurance package."
From Our Research Dept......
The "Right" Payment
Over the years we have explored the various parameters that can effect interest calculations and, thus, the resulting payment for a given transaction. We deal constantly with the issue of why different calculation tools produce distinct payments for the same transaction data. We thought the time was right to revisit that subject.
With all the variations of credit available to consumers in today's fast paced world, one common mainstay remains, for creditor and consumer alike, in determining the merits and soundness of a specific credit transaction: the monthly payment. In today's marketplace it is probably more appropriate to say the "periodic payment" i.e. weekly or biweekly.
For a vast majority of consumers the payment represents the bottom line of whether a purchase or loan is "affordable". For creditors, the payment is the measuring stick used to evaluate the soundness of the interest and charge calculations.
Since Carleton's niche of expertise is the credit math calculations themselves, we often hear the statement "hey, your payment doesn't match what I get from a program off of my PC, it must be wrong."
Over the years we have expressed the opinion that "wrong" is a dangerous word to use in this business. The factors that go into determining the payment are varied and many times two answers are "different" but both are "correct" given the set of parameters used to compute the payment.
For instance, a loan with a $10,000 principal amount (principal being defined as the amount upon which interest is computed), 9.5% interest rate, repayable in 36 monthly payments, a contract date of March 1, 2001 and a scheduled first payment date of April 1, 2001 can produce the following payments:
A. $320.32 B. $320.41 C. $320.37 D. $320.35 E. $320.38 F. $320.42 The reasons for the differences are as follows:
A. $320.32 utilizes "month and day" time counting and computes interest for the period of "1 month" or 1/12 of a year regardless of the number of calendar days in the interval.
B. $320.41 utilizes "actual day" time counting when computing interest for the first interval. All subsequent intervals are presumed to be 1 month (1/12). Interest is computed for 31 days with each day using a daily rate of 1/360 of the annual rate.
C. $320.37 also utilizes the "actual day" time counting for the first interval as above except the daily rate of interest is 1/365. That change in a key parameter produces less interest in the first interval (31/360 = .086111 and 31/365 = .084932) and, thus, a slightly smaller payment.
D. $320.35 utilizes "actual day" time counting but does not restrict it to the first interval only. Interest is computed by what we term the "per diem" method since the actual calendar days between each scheduled payment date are recognized. The daily rate for each day is 1/365 with 1/366 being used during leap year.
E. $320.38 incorporates a 5/4 rounding parameter used with the full precision payment in illustration number three. The extended precision payment is $320.3777. The $320.37 payment is truncated to two decimal places to ensure it does not exceed the stated 9.50% interest rate.
F. $320.42 incorporates a "high" rounding parameter used in conjunction with the full precision payment in illustration number two of $320.4134.
There are six distinct monthly payments for the same set of transactional data and we have not even begun to scratch the surface of the number of parameters that could be changed. This was a rather tame illustration since the interval between the contract date and first payment date was one calendar month. Extended first intervals (45 days, 60 days, 90 days etc.) magnify differences in parameters and the gap between possible "right" payments would widen considerably.
We also have not touched on the subject of starting with a $10,000 "proceeds" amount and incorporating credit insurance premium calculations into the mix. An extensive whole new set of variables comes into play and must be considered.
The moral to this story is that just because payments, or insurance premiums, appear to be different for the same data, it does not necessarily mean one is "right" and the other is "wrong". Determining if the calculations are correct takes closer inspection into the parameters and presumptions that went into creating those calculations. Chances are, the only "wrong" conclusion is thinking that a single universal answer exists for a given set of transactional data.
Distribution of this newsletter is made with the understanding that the information contained herein has not been certified as legally acceptable for any particular statute, law, or regulation. For more timely and detailed information, subscribe to our Consumer Finance Newsletter and/or The Cost of Personal Borrowing in the United States compliance guide which are both published and updated ten times a year.
Carleton Inc. corporate offices are located in South Bend, IN with one wholly owned subsidiary: Financial Publishing Company, in Boston, MA. The Carleton companies provide over 30 years of financial computation experience to the consumer credit and mortgage industry.
