Covenants Setup

Overview

The Covenants feature in timveroOS provides automated monitoring of borrower obligations throughout the loan lifecycle. This guide covers the configuration of covenants, their dependency on the Metrics Engine, and the setup process.

Navigation: Settings → Covenants

Dependency Architecture

Covenants build on a chain of dependencies:

Data Source
↓
Mapping (Feature Store) - extracts and transforms data
↓
Metric (Metrics Engine) - calculates indicators based on mappings
↓
Covenant - validates compliance based on metric

How It Works:

1. Data Source provides raw data (e.g., client's credit history)

2. Mapping extracts and transforms data into required format

3. Metric calculates evaluation indicators based on mappings

4. Covenant checks whether the metric value meets established criteria

Business Context

In modern lending operations, covenants serve as critical risk management instruments—contractual obligations that borrowers must maintain to preserve favorable loan terms. The timveroOS Covenants module automates the monitoring of these obligations, providing early warning of potential issues and enabling timely intervention.

Covenant Types

Financial Covenants

Monitor borrower financial metrics:

• Debt service coverage ratios

• Leverage ratios

• Liquidity requirements

• Revenue thresholds

• Profitability metrics

Collateral Covenants

Track security-related obligations:

• Loan-to-value (LTV) ratios

• Insurance maintenance

• Property conditions

• Valuation requirements

Operational Covenants

Ensure business compliance:

• Financial reporting requirements

• Business restriction adherence

• Management requirements

• Operational thresholds

Information Covenants

Maintain transparency requirements:

• Regular reporting submissions

• Event notifications

• Compliance certifications

• Document updates

Configuration Components

Covenant Form Fields

When creating or editing a covenant, the following fields are available:

Field	Type	Description
Covenant Name	Text	Covenant identifier (e.g., "DSCR Compliance", "LTV Ratio Check")
Holder Type	Dropdown	Participant type the covenant applies to
Product Additives	Multi-select	Products/additives this covenant applies to
Metrics	Dropdown	Select metric from Metrics Engine
Metric for Anchored Value	Dropdown (Optional)	Metric to save baseline value at loan creation
Periodicity	Dropdown	Check frequency (Daily, Weekly, Monthly, Quarterly, Annually)
Number of Periods	Number	Number of periods per step
Execution Type	Dropdown	Schedule-based or Event-driven
Validation Script	Editor	Expression for compliance evaluation

Execution Methods

Configure how covenants are monitored:

Event-Driven Execution:

• Contract signing triggers

• Loan closure events

• API-initiated checks

• Status change triggers

Schedule-Based Execution:

• Daily monitoring

• Weekly reviews

• Monthly assessments

• Quarterly evaluations

• Annual compliance checks

Complete Configuration Process

Step 1: Create Required Mappings in Feature Store

Before creating covenants, define the data mappings:

Example Mappings:

• Mapping 1: Total overdue debt across all client's credit obligations (totalOverdue)

• Mapping 2: Total debt across all client's loans (totalObligations)

See Feature Store for mapping configuration.

Step 2: Create Metric

1. Navigate to: Settings → Metrics → Add

2. Fill in:

   • Metric Name: e.g., "Overdue Debt Ratio"

   • Subject Type: Select object type (Loan, Participant, Collateral)

   • Expression: Write formula using mappings from Feature Store

Example Metric Expression (JavaScript):

const totalOverdue = features.get('loanDataSource', 'totalOverdue');
const totalObligations = features.get('loanDataSource', 'totalObligations');
return (totalOverdue / totalObligations) * 100;

See Metrics Engine for detailed configuration.

Step 3: Create Covenant

1. Navigate to: Settings → Covenants → Add

2. Basic Fields:

   • Name: Covenant name

   • Metrics: Select metric from dropdown (created in Step 2)

   • Metric for Anchored Value: (Optional) Metric to save baseline value

   • Credit Product (Additives): Select products/additives

3. Configure Execution:

   If Schedule-Based:

   • Periodicity: Daily / Weekly / Monthly / Annually

   • Number of Periods per Step: Number of periods

   • Execution Start: Time

   If Event-Driven:

   • Event: Select trigger event

4. Write Validation Script:

   In the Expression editor (JavaScript, Python, or SpEL):

   overdue_debt_ratio > 3

5. Click Save

Step 4: Assign to Products

1. Link covenants to specific products via additives selection

2. Define applicability rules

3. Test with sample loans

Anchored Value Configuration

Concept

Anchored values capture baseline metrics at loan origination, enabling:

• Relative performance tracking

• Change monitoring over time

• Trend analysis capabilities

• Historical comparison points

Configuration

To enable anchored values for a covenant:

1. In the covenant configuration, fill the Metric for Anchored Value field

2. Select the metric that should be captured at loan creation

3. Save the covenant

Behavior:

• At loan creation, system automatically saves the anchored value

• Value is captured if covenant is linked to the loan's additive

• Displayed in the Anchored Values tab on the loan

Interactive Demo - Configuration

Integration Points

Data Sources

Covenants integrate with:

• Metrics Engine: For calculation values

• Feature Store: For data mappings

• Workflow System: For automated responses

• Notification System: For alerts and communications

External Systems

• Property valuation services

• Insurance verification systems

• Financial data providers

• Credit bureau integrations

Best Practices

Covenant Design

• Define clear, measurable thresholds

• Use appropriate monitoring frequencies

• Consider data availability

• Balance strictness with practicality

Metric Dependencies

• Ensure metrics are tested before covenant creation

• Verify data source availability

• Document calculation methods

• Test with edge cases

Product Assignment

• Assign covenants to appropriate products

• Consider different covenant requirements per product type

• Test covenant execution on sample loans

Common Use Cases

Commercial Real Estate

Monitor property-related covenants:

• LTV maintenance

• Occupancy rates

• Insurance coverage

• Property condition

Asset-Based Lending

Track collateral covenants:

• Borrowing base compliance

• Inventory levels

• Receivables quality

• Concentration limits

Corporate Lending

Monitor financial covenants:

• EBITDA levels

• Leverage ratios

• Capital expenditures

• Working capital

Troubleshooting

Covenant Not Saving

• Verify all required fields are completed

• Check metric selection

• Confirm product/additive selection

• Review validation script syntax

Metric Not Available in Dropdown

• Verify metric is created and saved

• Check metric status (active)

• Confirm metric subject type matches covenant holder type

Anchored Value Not Configured

• Ensure "Metric for Anchored Value" field is filled

• Verify covenant is linked to the correct additive

• Check that metric is valid for anchored value capture

Related Operations

Once configured, see how covenants are used in operations:

• Covenant Monitoring (OPS) - Monitoring compliance and resolving violations

• Covenants Anchored Values (OPS) - Working with anchored values during origination

Next Steps

With covenants configured, explore:

• Metrics Engine - Configure underlying calculations

• Feature Store - Set up data mappings

• Workflow Fundamentals - Automate breach responses

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For additional covenant configuration support, consult your implementation team or system documentation.