Introduction
Managing investor flow of funds ensures proper distribution of payments, interest adjustments, and holdback allocations. Configuring these settings correctly helps streamline payouts, clarify stakeholder responsibilities, and eliminate uncertainty.
Navigating to Flow of Funds Settings
Navigate to Settings > Company Settings > Loan Setup/Origination.
Select Flow of Funds.
Adjust settings as needed for loan origination and discharge.
Tip: Ensure these settings are finalized before funding a loan, as changes made afterward require unfunding and re-entering servicing details.
Configuring Investor Flow of Funds
Investor flow of funds settings allow you to determine who handles distributions and when payments occur.
Origination Flow of Funds
These settings define how payments to investors are managed at loan origination.
Setting | Description |
Gross Funding (Lawyer Pays) | The entire loan amount is sent to the Lawyer, who distributes investor proceeds at origination. |
Net Funding (Lender Pays) | The Lender retains and pays investor-related amounts before sending the remaining balance to the Lawyer. |
At Time of Closing | All funds are distributed immediately upon loan closing. |
On a Monthly Payment Day | Investor distributions align with the borrower's monthly payment schedule. |
Pay Via PAD | Investor payments are included in Pre-Authorized Debit (PAD) files. |
Best Practice: Offset investor payouts by one to two weeks after borrower payments to allow processing time and mitigate the risk of missed investor payments.
Discharge Flow of Funds
These settings determine how investor payments are handled when the loan is discharged.
Setting | Description |
Gross Discharge (Lawyer Pays) | The Lawyer disburses final investor payments, including principal, per-diem interest, and discharge distributions. |
Net Discharge (Lender Pays) | The Lender manages final investor payouts at loan discharge. |
Pay Via PAD | Discharge amounts appear in PAD files for automated processing. |
Investors Are Paid Renewal and Mid-Loan Adjustment Fees via PAD (When Turned On) | Automatically generates PAD entries for investor fees due upon renewal or mid-loan adjustments. |
Prepaid Interest (Holdback) Distributions
These settings specify how holdbacks or prepaid interest are handled.
Setting | Description |
Paid Up-Front | Holdbacks or prepaid interest are immediately distributed to investors at closing. |
Paid Over Time | Funds remain in a trust account and are disbursed incrementally with each payment cycle. |
Warning: Modifying these settings after funding does not automatically apply changes. Unfunding is required, which resets all servicing details.
FAQs
Can I change investor payout settings after funding a loan?
No. Once a loan is funded, changes to payout settings require unfunding, which resets all servicing details.
What is the difference between gross and net funding?
Gross funding means the Lawyer distributes investor funds, while net funding allows the Lender to manage payouts before transferring the remaining balance.
Should I align investor payouts with borrower payment dates?
Offset investor payouts by one to two weeks after borrower payments to allow processing time and reduce the risk of missed investor payments.
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