Loan Consolidation

Loan consolidation combines two or more existing loan accounts for the same borrower into one controlled target facility. The workflow preserves the source-loan history, makes every component treatment explicit, routes the case through approval configuration, and posts the settlement through the central GL workflow before changing loan balances.

Consolidation is not a shortcut for closing loans and creating another loan. The source payoff, component treatment, target schedule, security or guarantor actions, investor actions, approval decision, GL settlement, and final account states must remain traceable to one case.

Workspace Reference

Workspace	How Users Reach It	What Users Do There
Loan Products	Loans -> Setup -> Products	Enable and review product policy flags for source and target consolidation behavior.
Loan Accounts	Loans -> Operations -> Accounts	Select compatible accounts belonging to one borrower and start a consolidation draft.
Consolidations	Loans -> Operations -> Consolidations	Review eligible sources, create cases, refresh quotes, review the packet, resolve readiness, and execute approved cases.
Approval Configurations	Administration -> Access -> Approval Configurations	Define the approval route and conditions for LOAN_CONSOLIDATION_CASE_SUBMIT.
Approval Items	Administration -> Access -> Approval Items	Review, return, reject, or approve submitted consolidation cases.
GL Posting Rules	Accounting -> Setup -> GL Posting Rules	Review the seeded consolidation rule headers, details, resolver scopes, and handler bindings.
Reports	Reporting -> Reports	Run the consolidation register, lineage, accounting, approval, arrears, investor, collateral, top-up, and reversal reports.

Tenant Prerequisites

Before enabling this workflow for a tenant, confirm:

• The tenant has received the loan domain tables, procedures, callbacks, and release metadata for the consolidation feature.
• The loan-core seed pack is live, including loan flags, loan GL rule templates, loan roles, and loan approval metadata.
• The accounting-reporting-core dependencies are live, including report groups, report definitions, GL tags, and the central posting engine.
• The tenant has an open business day and fiscal period for the intended effective date.
• The target product has an approved pricing profile, currency, schedule behavior, and accounting configuration.
• The approval configuration exists for LOAN_CONSOLIDATION_CASE_SUBMIT. Approval is performed through the central Approval Items workflow; it is not a button inside the consolidation detail drawer.
• The operating roles have been assigned through the tenant access workflow.

Do not repair tenant balances directly in SQL to make a case pass. If a release, seed, GL rule, or approval configuration is missing, correct the source release or configuration and rerun the governed rollout.

Product Policy Setup

Open Loans -> Setup -> Products, edit the intended product, and review the consolidation flags in the product flag editor. Existing products default to conservative behavior. Enable only the policy the institution has approved.

Source Product

For a product whose accounts may be consolidated, review:

• Allow as Consolidation Source
• Allow Active Source Consolidation
• Allow Arrears Source Consolidation
• Allow Non-accrual Source Consolidation
• Allow Restructured Source Consolidation
• Allow Written-off Source Consolidation, only when explicitly approved
• component capitalization flags for due interest, accrued interest, fees, penalties, and tax
• approved waiver and write-off flags
• Require Payoff Quote Refresh
• collateral, guarantor, and investor review policies

The source product must not silently lose a component. A component must be capitalized, settled externally, deducted from top-up, waived with approval, written off with approval, or left on the source according to policy.

Target Product

For a product that may receive consolidated balances, review:

• Allow as Consolidation Target
• Allow Cross-product Consolidation
• accepted source product IDs, categories, or product types
• same currency, business unit, and holder requirements
• top-up permission and maximum top-up amount or percentage
• fresh credit, affordability, and collateral assessment requirements
• guarantor, collateral, investor, and accounting classification policies

The target product must be compatible with every selected source loan. A target product that accepts only one source product must not be used for a mixed-product case.

Accounting Setup

Consolidation uses the existing domain GL posting engine. Review the seeded rule headers and their details under Accounting -> Setup -> GL Posting Rules. The exact detail mapping is tenant-specific, but the readiness preview must resolve the required movements for:

• source principal settlement
• source interest, accrued interest, suspended interest, fees, penalties, and tax treatment
• target principal recognition
• consolidation clearing
• external settlement and top-up movements where applicable
• waiver, write-off, investor, modification gain or loss, and rounding movements where applicable

Use the consolidation detail Accounting and Readiness tabs to verify the business result. A case cannot be submitted or posted while required rules are missing. Do not create duplicate headers merely because a rule is not visible in a tenant; first verify the tenant release and seed-pack status.

End-to-End Operator Flow

1. Find Eligible Sources

Open Loans -> Operations -> Consolidations -> Eligible Sources, or select loan accounts from Loans -> Operations -> Accounts and choose Combine Loans.

Select accounts for the same borrower. The system checks:

• holder type and borrower identity
• account state and approval state
• currency and business unit
• source product policy
• target product compatibility
• arrears and non-accrual state
• pending adjustments or conflicting workflows
• security and investor readiness

Excluded accounts should show a business reason. Do not work around an eligibility block by entering internal IDs.

2. Create the Draft

Choose the target product, effective business date, source accounts, and business reason. The system creates a draft case and freezes source payoff anchors. No source balance or target loan is changed at this stage.

3. Review the Case

Open the case detail and review:

• Overview for before-and-after totals
• Source Loans for account states and balances
• Payoff Quote for component totals and quote freshness
• Treatments for each principal, interest, fee, penalty, tax, and other component
• Security for collateral, guarantor, and insurance actions
• Investor Funding for funded positions and reallocation or settlement
• Target Schedule for installment dates and amounts
• Accounting for resolved posting movements
• Readiness for remaining blockers
• Review Packet for the approval decision summary

If a source balance changes, refresh the payoff quote and review the delta before continuing.

4. Submit for Approval

Resolve all readiness blockers, then choose Submit for Approval. The backend evaluates the current approval configurations using the case context, including amount, product mix, arrears, waivers, write-offs, top-up, security, investor funding, and accounting classification.

The case appears in Administration -> Access -> Approval Items. The approver should review the full packet and then approve, return, or reject through the central approval workflow.

5. Settle and Apply

After approval:

1. Reserve the controlled target account.
2. Post or retry the consolidation GL settlement.
3. Confirm the GL callback reports a posted result.
4. Apply the consolidation case.

The source loans close with consolidation lineage only after the controlled settlement succeeds. The target account activates only after the same workflow completes. Repeating a request with the same idempotency operation must not create a second target account or duplicate the journal.

6. Verify the Result

Confirm:

• source accounts show their original account numbers and consolidation closure reason
• the target account links back to every source account
• the target schedule matches the approved preview
• source and target balances reconcile to the approved treatment
• GL journals are balanced and linked to the case
• security and investor transitions are complete
• the activity history records each status transition

Cancellation and Reversal

Use Cancel for a draft, returned, or otherwise unapplied case when the settlement has not been posted. The user must provide a meaningful reason. Cancellation does not alter source balances.

Use Reverse only for an applied case that remains eligible for reversal. The user must provide a meaningful reason. The backend checks later source and target activity, posts controlled reversal accounting, and restores lineage only when the reversal is safe. A repayment, adjustment, or other later activity may block reversal and require a controlled accounting review.

Reports and Documents

From the case toolbar, open the consolidation report group or use Reporting -> Reports. The available reports include:

• Loan Consolidation Register
• Source-to-Target Lineage
• Accounting Reconciliation
• Approval Aging
• Waiver and Write-Off
• Top-Up
• Product Migration
• Arrears Impact
• Investor Reallocation
• Collateral Migration
• Reversal
• Exposure Before and After
• Accounting Classification

The case detail also provides a review packet and separate business documents for payoff settlement, consolidation agreement, new loan agreement, security migration, guarantor consent, investor reallocation, accounting settlement, and reversal. These documents are generated from the case snapshot and should be retained with the approval evidence.

Acceptance Checklist

Run at least these scenarios in a staging tenant before production use:

• same-product consolidation with no top-up
• cross-product consolidation allowed by policy
• cross-product consolidation blocked by policy
• different currency and different business unit blocks
• stale payoff quote detected and refreshed
• capitalized interest, fees, penalties, or tax
• approved waiver and write-off
• collateral transfer or release
• guarantor consent required
• investor settlement or reallocation
• missing GL rule blocks readiness
• approval return, rejection, and resubmission
• GL rejection and retry
• duplicate submit, duplicate apply, and source reuse protection
• cancellation before settlement
• safe reversal after apply and blocked reversal after later activity

Record the tenant, effective date, case number, approval item, target account, GL batch, reports, and exported documents for every acceptance run.