Deferrals

Payment deferrals provide a powerful tool for managing borrower hardship situations while maintaining the integrity of your loan portfolio. This feature allows you to temporarily pause payment requirements for borrowers experiencing short-term financial difficulties.

Use Cases

Hardship Management

• Temporary Financial Setbacks: Accommodate borrowers facing unexpected life events (job loss, medical emergencies, natural disasters)
• Proactive Delinquency Prevention: Address potential repayment issues before they result in delinquency
• Customer Retention: Maintain positive borrower relationships through flexible repayment options

Portfolio Optimization

• Reduced Servicing Costs: Manage deferrals systematically rather than through manual tracking
• Improved Recovery Rates: Increase likelihood of full repayment by providing temporary relief
• Automated Reporting: Maintain accurate portfolio performance metrics with proper deferral flagging

Getting Started

Before initiating a payment deferral, consider:

• Borrower's payment history
• Nature and expected duration of the hardship
• Account status and previous modifications
• Regulatory and compliance considerations

Once the borrower is deemed eligible for a payment deferral, navigate to either Canopy OS or via Canopy's APIs to initiate a payment deferral.

Creating a Payment Deferral

Firstly, in order to defer obligations to a later date, we'll want to fetch eligible dates to defer obligations to since obligations can only be deferred to revolving payment due dates. Therefore, you'll call Canopy's Get payment due dates for a line of credit API to find the payment due dates on the line of credit.

Once an appropriate payment due date to defer obligations to is chosen, you'll call the Defer LoC obligations API. Through this API, a lender can choose to defer past, current or future obligations to a future payment due date on the line of credit.

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Deferral periods

Once the previous API call is executed, that beings an active deferral period. The deferral period lasts until the payment due date to which past, current and future obligations have been deferred to.

Monitoring Deferred Accounts

Deferring obligations will automatically tag via our segmentation servicing tool the account as being in an active deferral period, which can also be viewed via Canopy OS.

Once in a deferral period:

• Borrower is no longer considered past due, if past obligations were deferred
• Interest no longer is accruing on obligations, until the deferral period ends
• Deferred accounts are flagged in the dashboard with a "Payment Deferred" status
• System automatically tracks deferral periods via segmentation
• Deferred accounts can be seen in Canopy OS
• Notifications are sent when a deferral is executed
• Reports provide visibility into aggregate deferral metrics across your portfolio

Post-Deferral Management

Once the deferral period is over, cycles return to normal and any deferred obligations and new obligations (created the in the current cycle) will all be owed by cycle's payment due date.

A lender may also want to:

• Extend deferrals if necessary
• Provide notifications to borrowers as they exit deferral status

Frequently Asked Questions

How do deferrals affect credit reporting?

Properly executed deferrals through our system are reported as "deferred" rather than delinquent to credit bureaus, protecting the borrower's credit profile during the hardship period.

Does interest continue to accrue during the deferral period?

Depends, in the spirit of deferrals, Canopy's default implementation is not accrue interest on deferred obligations (not including already accrued interest obligations in the case of past due obligations). However, if needed, Canopy will work with the lender to enforce this behavior via our flexible policy engine.

Can partial deferrals be offered?

Yes, the system supports partial payment deferrals where borrowers pay a reduced amount rather than skipping payments entirely.