Managing a bond redemption shortfall

By: Bernard Hecht

SS&C's DBC Housing application provides many options on how to use surplus and/or mortgage prepayment funds through targeted, layered, conditional bond redemptions.  In addition to this robust section of redemptions, the program also allows for the user to use monies that have been transferred to the redemption accounts, prior to the actual bond redemptions, to be available for shortfall deficiencies.

One of these options is to look forward to the upcoming debt service and/or expense dates and maintain protected balances to be available for upcoming debt service and/or expense. Within this option the program also provides a choice for automated accrual calculations. For example, if mortgage revenue is received monthly and bond interest is paid semiannually with bond principal paid annually, at the end of each monthly period a portion (or all) of the redemption funds on hand can be reserved representing the pro rata share of upcoming annual bond principal (1/12th), and/or interest (1/6th), to be held until the date required when the desired designated sequence of uses will be executed.

Other options include:

  1. All funds will be reserved, until the entire amount needed for the next payment has been accumulated.
  2. The program allows for changes in these selections during the life of the entire financing.
  3. Similar choices are also available for expenses
  4. Opportunity is provided for the user to enter amounts and corresponding dates of funds to be reserved.

This is another example of how the SS&C's DBC Housing provides the users with many easy ways to structure their financings.

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