What's New for the 1098 Form

Get ready for a few changes for tax year 2016… at least when it comes to your 1098 (Mortgage Interest Statement) form. For people who manage and service loans, new reporting requirements will be in effect. Luckily, they're straightforward:

·      Starting January 1, 2017, all 1098 forms given to payers MUST include the address or description of the mortgaged property.

·      Also new to the form in '17:

o   Reporting the outstanding mortgage principal (as of January 1, 2016)

o   Including the mortgage origin date

o   Indicating paid mortgage insurance premiums of $600 or more

The 1098 format has also changed. In previous years, three forms were on a page. The newest version will have only one per page.

These aren't dramatic changes for lenders, but you should be aware of them. Moneylender Professional loan servicing software plans to issue a patch for the new 1098 form in November. Look for it so you'll be ready when tax time rolls around.  

Throw Out That Amortization Schedule (Maybe)

When discussing loan topics from A to Z, amortization falls near the very beginning of the alphabet. It's a straightforward concept. An amortized loan schedules identical payments that cover both principal and interest. Typically, each installment's funds pay interest first. Principal is paid down and reduced by whatever's left.

Initially, a large proportion of an amortized loan goes towards interest. But with each standard payment, principal reduces a bit. The proportion of interest paid in each installment decreases over the course of the loan. By the end of the term, most of the installment goes to principal, and very little goes to interest. This means that, throughout the life of the loan, principal and interest have an inverse relationship.

You can see this pattern play out beautifully in an amortization table displaying the payment schedule over the entire course of a loan. For each installment, this generally includes:

·      Amount due

o  Amount that's interest

o   Amount that's principal

·      Loan balance after the payment is applied

There's just one problem with that amortization schedule: as soon as a borrower diverges and pays too much or too little, all that precise and well laid-out information is wrong. Maybe it's just a bit off, but the damage has been done. Time to start over. 

With Moneylender Professional loan servicing software, it's easy to account for over- or underpayments. Your original amortization table may no longer be valid, but your loan records are.

Moneylender Professional 3 Is Coming Soon… Here's a Sneak Peak

Since Friday, October 14, Moneylender Professional 3 has been available for preorder to Moneylender 2 license holders. MLP 3's Alpha version will be downloadable on October 31. People have already started calling, wanting to know more. Check out some user questions and our answers.

Q: Will MLP 3 be online or desktop?

A: It’ll be for Windows desktop.

Q: Does the software provide IRS online filing template for 1098s?

A: Yes, we plan to have IRS FIRE (the electronic file format for 1098 and 1096 forms) implemented by the time MLP 3 is ready for production use.

Q: Can I get a demo of the new upgrade before committing to buy the new version?

A: We're not planning on having a demo version available until the production release. When Moneylender 3 is production-ready (January or February), we’ll have a demo mode you can try out before buying the upgrade.  If you preorder Moneylender 3, you’ll be able to download and play with the Alpha and Beta versions sooner.

Q: Is it possible to run MLP2 and MLP3 separately but concurrently on the same PC?

A: Yes, they use different file types and license settings. They install to different folders. They won’t step on each other’s toes at all.

Q: Is it hard to import portfolios from Moneylender Professional 2?

A: Nope, it’s pretty painless. The only thing you have to do is tell MLP 3 which third parties are escrow and which are fees. That way, the software will properly copy the escrow settings into the new Escrow Tracking System and set up the lender fees as Fees.  Everything else is upgraded without any input from the user.

Deferring a Loan: Who Wins?

When a borrower gets too far behind, the credit score is affected. Sometimes a lender helps out by offering to defer a payment, moving it to the end of the loan. That extends the loan a little, but it could be just the breathing space the borrower needs. By the following month, the loan is back on track.

If the borrower agrees to defer the loan (usually in writing), the lender can convert the unpaid interest to principal. The lender may also choose to adjust the payment amount due for the remainder of the loan. A common mistake is to think the entire amount due can be added to the principal balance in exchange for deferring one or more payments. This isn't correct. Only the outstanding interest should be converted to principal.

Moneylender Professional loan servicing software makes it simple to defer payments using the Loan Menu.  The borrower gets to stay current on a loan when finances are too tight to continue making payments, and the lender gets to capitalize some interest.  If done with care, deferring a loan means everybody wins.

Blindsided: How to Add Principal to a Loan

Best-case scenario: your lenders pay on time, and funds process smoothly. Everyone's happy. Unfortunately, it doesn't always work that way. I recently talked with a Moneylender Professional loan servicing software customer who had a stressful experience. A borrower didn't pay property taxes. By the time the lender discovered this, a tax sale was imminent.

That would have put the lender in a bad situation: holding an outstanding loan on a house that the borrower no longer had access to. The lender jumped in to pay the taxes, saving the day. But that raised two more issues. How would the lender recoup the expense? And could he keep this problem from happening again? The answer to both, happily, was "Yes." Moneylender Professional was able to help.

Actually, there are several ways Moneylender can handle this situation, depending on the borrower and lender's agreement.

·       The repayment could be accomplished with one lump sum.

·       The amount could be tacked onto the principal. Then you have two choices. Add an extra amount to each installment throughout the life of the loan OR keep installments the same and have an extra-large payment at the end.

·       The reimbursement could be classified under "Fees" and paid off over a shorter period of time.

We also used Moneylender to add escrow fees. Total taxes for the next year were spread over several months. The borrower plans to use that money to take care of property taxes. No more missed payments; no more hassle. If you run into an unusual situation and need help with Moneylender, call or email us.

Moneylender Professional 3: What’s New?

Moneylender Professional 3 loan servicing software is making its debut in 2017. The software’s creator, Josh Whitman, answers some questions to give you background and insight into the latest version. 

Why release Moneylender Professional 3 now?

Since its release in 2004, Moneylender’s user base has grown and grown. The lenders using our software deserve to have access to the latest innovations of modern technology. Some borrowers even demand it. 

Moneylender was created as a hobby project, but it’s become a major component of our business model. We’re serious about the role the application plays in the daily operations of hundreds of professional lenders. Many of our customers are casual lenders, and that’s great. But an ever-growing population of large businesses are using Moneylender to power their financing activities.

What are some of the changes between versions 2 and 3?

We've made a major change in storing loan data in order to: 

• Reduce inefficiencies in the original. 
• Work more rapidly for lenders with over 2,000 loans. Some lenders with 10,000+ loans in their portfolios have sluggish performance during certain bulk operations

Another big change is how loan data is shared on a network. The new fully-encrypted networking system lets computers in multiple physical locations share loan data from a single source without needing additional network security layers.

The loan record architecture was changed to let the loan calculator handle even more lending scenarios. 

• In most cases, the new architecture allows drastically faster loan recalculation than Moneylender 2. 
• The calculation system is totally transparent. You can see every transaction Moneylender 3 makes on each of the nine balances associated with each loan.

What are some additions that appear in Moneylender 3? 

• A big addition to our loan servicing software shows up in escrow account management. Moneylender 2’s escrow support is more of a work-around. Moneylender 3 allows the full accounting and balance tracking of escrow for mortgages. There’s also a RESPA (Real Estate Settlement Procedures Act) compliant escrow adjustment calculator.
• Another huge addition is the ability to print statements to PDF and email them directly to borrowers with just one click. A lender chooses a group of loans, and Moneylender sends all the statements out. If email isn’t an option for certain borrowers, statements can be printed and mailed.
• Images have returned – so lenders can again embed their company logos in printable statement templates.
• File attachments allow users to include scanned documents and other data in portfolio files. You can pull the files back out to the hard drive, as needed.

What’s the price for the newest version? 

We’ll be charging $329 per license for Moneylender Professional 3. We’re also bringing back Moneylender Express for $149. In this variation, users view just one loan at a time. 

Do any of the changes stem from customer requests?

Practically all of them. Some came from multiple requests. We think most users are going to appreciate the vast majority of these suggestions.

What’s the release timeline? 

We hope to have an Alpha version for our most intrepid users to play with by early October. The polished, production version should be available early in 2017.

What steps do you take to prevent new bugs?

All code has bugs. Internally, we have multiple tiers of application testing find and address as many issues as possible. The Alpha and Beta versions widen the user base to give us feedback about more complex bugs, such as problems handling exotic repayments in the real world. 

When our friends report everything’s good with their loans, and we’ve worked the program over multiple times, we’ll greenlight Moneylender 3. 

What kind of support is offered for the new version?

Same as we always have: unlimited phone and email support. Any bugs are immediately fixed and released in an update.

How long has it taken to develop the new version?

 A while… I started developing the new file system about seven years ago. Then I wrote the new network system. I rewrote the structure of the loan calculator in 2015. In 2016, we began rewriting the entire user interface, along with all the underlying code. We rewrote the whole application from scratch in the programming language C#. Moneylender 2 is written in VB (Visual Basic).

What if a customer doesn’t like the new version?

We’ll continue to support Moneylender 2 for at least two years after Moneylender 3 comes out. There are still people using Moneylender 1.1 out there. 

Customers who like Moneylender 2 will probably like Moneylender 3. We’ve tried to keep the program familiar while refining the user interface and improving the overall user experience.

How long do you think it will take to learn the new version?

For users of Moneylender 2, I think the biggest adjustment will be in managing loan settings. In Moneylender 2, all the initial settings on a loan were done in the Loan Record. In Moneylender 3, the Loan Record pretty much just holds the account number. Alongside the loan are unlimited principal payouts, interest rates, and late fee settings. 

These records exist in Moneylender 2, but you wouldn’t use them if you just made the loan and never changed the terms over the course of repayment. Moneylender 3 has streamlined Loan Wizards. Setting up new loans is faster and easier than in Moneylender 2. But you can still really fine-tune the loan settings.

What’s next on the horizon for Moneylender Professional?

Shortly after we release Moneylender 3 for production use, we’ll start implementing an automatic payment mechanism. It’ll be similar to printing statements. We’ll partner with a merchant services provider that specializes in services for lenders. We plan to add the ability to set borrowers up for auto-pay by:

• debiting bank accounts 
• using credit cards

We’re also going to try to integrate more interoperability. For example, we’ll support the IRS FIRE format for reporting 1098 tax data to the IRS later in 2017.

Further down the road, we hope to produce an API (application program interface) that allows lenders to develop their own code. This will further streamline and integrate Moneylender into their businesses.