Happy belated 2012 to all our blog readers!
We’ve taken a bit of a break from the blog to tend to some end of the year housekeeping chores, but we’re back on track and looking forward to a host of new discussions on the computational aspect of lending.
It’s leap day, February 29th. While leap day, and leap year, is ostensibly a corrective calendar measure, attributed most often to Julius Caesar, I am always intrigued when it rolls around every fourth year as to what effect it may, or may not, have on lending and servicing systems. It makes me wish I could travel in an Ebeneezer Scroogesque manner and see first- hand what happens inside every lending institution in America on this day.
- If a payment is received and posted today is it recognized as 2/29/2012?
- Does interest accrue on the balance at 1/366 of the annual interest rate? Or 1/365?
- If your front end originated the payment on an “exact day” interest basis but uses a “365/365” calendar, does that mean you skip today when posting? Or post as of February 28th so as to be fair to the consumer? Is the system possibly collecting one more day of interest than was agreed to contractually?
I have a basket load of permutations and combinations of those types of questions that always intrigue me regarding leap year. My largest wonder is whether it’s all simply academic or does leap year indeed directly impact the nuts and bolts operations in the creation and collection of loan payments.
