Trust Disbursement
Transaction Code 20 - Trust Disbursement is used to generate a voucher representing funds to be paid out to a Lender, and make the appropriate GL entries for the Servicer related to that payment. This transaction is run automatically for the amount due to the lender. Upon receipt of a payment, this amount will be the total amount of the payment received by the borrower less any servicing fees owed by the lender to the Servicer. It automatically runs when the following conditions (defining trust accounting setup) are met:
- The loan is a member of a loan group that is configured with Servicing Options.
- Within the Servicing Options, the Loan Group is attached to a Vendor. This is an account on the Lender’s Contact File which holds the balances owed to or by that Lender as well as the outstanding Vouchers for that lender.
The Trust Disbursement transaction is a General Ledger posting which will create a debit to the Trust-Undisbursed Funds and a credit to Accounts Payable.
When a payment is made, and this transaction is automatically run, Transaction Code 10 - Trust Deposit is also automatically run. This transaction creates a debit to Trust-Cash and a credit to Trust-Undisbursed Funds. The net result of both transactions being run for the same amount (which is what will happen if there is no servicing fee on the payment) is a debit to Trust-Cash Account and a credit to PH Accounts Payable. The act of printing the check creates a debit to PH Accounts Payable and a credit to Trust-Cash Account so that the net GL after the check has been remitted is a complete wash.
The General Ledger accounts involved in the Principal and Interest Payment transactions: Cash, Loan Asset, and Accrued Interest, represent the GL accounts of the lender, and not the servicer, and unless the servicer is also managing the ledger of the lender, they need not necessarily be defined at all.
Example
Borrower makes a payment of $300, of which $100 is an interest payment and $200 is a principal payment.| GL Accounts |
|---|
| Lender’s Cash |
| Lender’s Loan Asset |
| Lender’s Accrued Interest Receivable |
| Trust-Cash (Servicer’s GL) |
| Trust-Undisbursed Funds (Servicer’s GL) |
| PH Accounts Payable (Servicer’s GL) |
When the payment is made, the following transactions are run:
| Transaction | Debit GL/Amount | Credit GL/Amount |
|---|---|---|
| 200 - Principal Payment | Lender’s Cash: $200 | Lender’s Loan Asset: $200 |
| 202 - Interest Payment | Lender’s Cash: $100 | Lender’s Accrued Interest: $100 |
| 10 - Trust Deposit | Trust - Cash: $300 | Trust - Undisbursed Funds: $300 |
| 20 - Trust Disbursement | Trust - Undisbursed Funds: $300 | PH Accounts Payable: $300 |
From the point of view of the Lender’s GL, this leaves us with $300 cash, $200 reduced from the loan balance (Loan Asset), and $100 of interest payment received.
From the point of view of the Servicer’s GL, this leaves us with $300 of the Lender’s Cash in Trust, and a $300 credit in Accounts Payable corresponding to an outstanding $300 voucher.
For information on the other Trust transaction code involved, see Trust Deposit.
To see how this example changes when servicing fees are involved, see Trust Disbursement - Servicing Fee and Trust Receivable - Servicing Fee.
For information on how to configure the automation of the Servicing Fee, see Servicing Fee - Recurring Transaction.
