Covenant Monitoring

Overview

This guide covers monitoring covenant compliance and resolving violations during loan servicing. Covenants are automatically evaluated based on configured schedules, and violations require attention from servicing staff.

Navigation: Loans → Loan → Covenants tab

Covenant Execution Behavior

Automatic Execution

Covenants execute automatically based on configuration:

Schedule-Based:

• Daily, weekly, monthly, quarterly, or annual checks

• System calculates current metric value

• Compares against validation script condition

• Records result

Event-Driven:

• Triggered by specific events (status changes, API calls)

• Immediate evaluation upon trigger

• Results recorded in covenant history

Execution Results

Each covenant execution produces one of three results:

Result	Description	Action Required
Clean	All conditions met	None
Violation	Threshold breached	Resolution required
Exception	Temporarily excused	Review at exception end

Monitoring Workflow

Viewing Covenant Status

On Individual Loans:

1. Navigate to the loan record

2. Access the Covenants tab

3. View current status for each covenant

4. Review execution history in Covenant Archive tab

Portfolio View (if configured):

1. Access covenant monitoring dashboard

2. Filter by status (Clean, Violation, Exception)

3. Sort by severity or age

4. Identify loans requiring attention

Breach Detection

The system automatically:

• Evaluates covenant expressions per schedule

• Compares results against thresholds

• Identifies violations immediately

• Logs compliance status with timestamp

• Triggers notifications if configured

Interactive Demo

Resolving Violations

Resolution Process

When a covenant violation is detected:

1. Review Violation Details

   • Navigate to the loan's Covenants tab

   • Click on the violated covenant

   • Review execution details and metric values

2. Assess the Situation

   • Understand the cause of violation

   • Review borrower circumstances

   • Check historical compliance patterns

3. Take Resolution Action

   • Click Resolve on the covenant execution

   • Select resolution type

   • Enter resolution notes

   • Submit resolution

Resolution Options

Depending on system configuration, resolution options may include:

Cure Confirmed:

• Borrower has remedied the violation

• Metric now meets threshold

• Covenant returns to Clean status

Waiver Granted:

• Temporary or permanent waiver approved

• Document waiver terms and conditions

• Set waiver expiration if applicable

Exception Applied:

• Covenant temporarily excused

• Set exception period

• Schedule follow-up review

Default Declared:

• Violation triggers default procedures

• Escalate to appropriate team

• Initiate default workflow

Notification Handling

Receiving Covenant Alerts

When violations occur, you may receive:

• Email notifications

• System alerts

• Dashboard indicators

• Task assignments

Acting on Notifications

1. Review the notification details

2. Navigate to the referenced loan

3. Assess the violation

4. Take appropriate action

5. Document resolution

Tracking Compliance History

Execution History

Each covenant maintains complete history:

• All execution dates and results

• Metric values at each check

• Resolution actions taken

• User actions and notes

Accessing History

1. Navigate to loan's Covenant Archive tab

2. Select specific covenant

3. View execution history

4. Review trend over time

Troubleshooting

Covenant Not Executing

Possible causes:

• Covenant inactive

• Schedule not reached

• Metric calculation error

• Data source unavailable

Resolution: Check covenant configuration, verify metric availability, review error logs.

Incorrect Violation Detection

Possible causes:

• Metric calculation incorrect

• Threshold misconfigured

• Data currency issues

• Expression logic error

Resolution: Validate metric values, check threshold settings, verify data is current.

Cannot Resolve Violation

Possible causes:

• Missing required fields

• Permission restrictions

• Workflow not configured

Resolution: Complete all required fields, check user permissions, contact administrator.

Related Configuration

• Covenants Setup

• Metrics Engine (Setup)

Related Topics

• Loan Tracking - Viewing loan details

• Covenants Anchored Values - Baseline metrics from origination

---

For additional support, consult your supervisor or system administrator.