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#1154787 - 03/31/09 02:33 PM Higher -Priced Mortgage Loans HELP
donna.raisor Offline
Platinum Poster

Registered: 09/21/04
Posts: 554
I am trying to understand this but I am confused. I went out and looked at the rate sheet published by Federal Reserve on "average prime offer rate." On 3/26/2009 a 1 year ARM average rate is 4.85 and a margin of 2.75 so does this rate mean 4.85 + the margin? We do mortgage loans tied to 1 year Constant maturity rate + a margin of 2.75% usually, so would we be exceeding the threshold of 1.50 percentage points for a first lien? I guess I am confused about what rate we are to use is this "average prime offer rate" the same as the 1 year constant maturity rate? how do you determine if you are over the 1.50 or the 3.5percentage points, as you can tell I am really confused. On existing customers that are already set up can you make them escrow going forward? My next question is does this have to be stated in your loan documents about escrow or in the mortgage document?

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#1154963 - 03/31/09 04:42 PM Re: Higher -Priced Mortgage Loans HELP [Re: donna.raisor]
Irishguy Offline
Gold Star

Registered: 08/20/08
Posts: 462
Loc: Kentucky
The FFIEC has a rate calculator and it can be found here:

http://www.ffiec.gov/ratespread/default.aspx

You will not be required to make existing customers to escrow going forward.

I would recommend that you check out Jack Holzknecht's presentation on the Escrow Requirements for the New Regulation Z. He provided a lot of good information on this topic.

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#1155372 - 04/01/09 10:38 AM Re: Higher -Priced Mortgage Loans HELP [Re: Irishguy]
HallieK Offline
Gold Star

Registered: 07/05/01
Posts: 290
Loc: Oklahoma
The link you provide is the rate spread calculator that is used for HMDA. I thought that the High Priced Mortgages under the Revised Reg Z were calculated from a different base. If this is the case, where can these figures be found?

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#1155380 - 04/01/09 10:48 AM Re: Higher -Priced Mortgage Loans HELP [Re: HallieK]
Irishguy Offline
Gold Star

Registered: 08/20/08
Posts: 462
Loc: Kentucky
You are correct. The higher priced mortgages look at the average prime offer index.

If you choose the new calculator link from the link provided above, it will calculate the Higher Priced Mortgage spread for you.

I hope this helps.

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#1155402 - 04/01/09 10:56 AM Re: Higher -Priced Mortgage Loans HELP [Re: HallieK]
ktac MITCH Offline
Diamond Poster

Registered: 05/04/05
Posts: 1808
Loc: Giant side of TX
Originally Posted By: HallieK
The link you provide is the rate spread calculator that is used for HMDA. I thought that the High Priced Mortgages under the Revised Reg Z were calculated from a different base. If this is the case, where can these figures be found?

Along with the change to Reg Z for the new HPML - - - HMDA was ammended so that the rate spread reporting would match up to the new Reg Z rates.
SO - as Irish said, the new calculator page is what you need & it has links on there for the APOR tables for fixed and ARM.
There are also several prior threads about HPML that you might want to review.
_________________________
My opinions are just that, and might be worth what you paid for them.

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#1155589 - 04/01/09 12:47 PM Re: Higher -Priced Mortgage Loans HELP [Re: ktac MITCH]
HallieK Offline
Gold Star

Registered: 07/05/01
Posts: 290
Loc: Oklahoma
OK, I have pulled all the prior threads that I have been able to find, and am trying to make sense of all of them. I am trying to figure how may of our loans will fall into this new category. Can I use the calculator to figure the spread, or do I need to use the excel spread of the APRO? If I can use the calculator, which new one do I use, the one on or before 10/01 or after 10/01? Sorry for all the questions, I am a little behind on my compliance duties since I had to take on all the BSA duties.

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#1155632 - 04/01/09 01:18 PM Re: Higher -Priced Mortgage Loans HELP [Re: HallieK]
ktac MITCH Offline
Diamond Poster

Registered: 05/04/05
Posts: 1808
Loc: Giant side of TX
The calculator has always been used to determine if the spread was HMDA reportable.
Now HMDA is changing to come in line with Reg Z's new HPML - so the calculator tells you the spread / answer for both HMDA and HPML.
When to use the Old or the New calculator is given in the instructions on the calculator page based on Application date (after 10-1-09 = New) and a little twist of app prior to 10-1 but action taken after 1-1-2010 also = New
_________________________
My opinions are just that, and might be worth what you paid for them.

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#1155740 - 04/01/09 02:28 PM Re: Higher -Priced Mortgage Loans HELP [Re: ktac MITCH]
HallieK Offline
Gold Star

Registered: 07/05/01
Posts: 290
Loc: Oklahoma
Thanks for all the help. I understand that there are two different new calculators for if the application was taken before or after 10/01. I guess what I was trying to figure out is if I use the calculator and run some of the in house loans that we did in March, to see how many will fall under the new requirements, which of the two new one's to use, since neither really apply. I guess it really doesn't make a difference, either one will tell me approximately how many would be covered by the new requirements. We only do 1, 3, & 5 year balloon in house (with a 15 or 20 year AM). I have a feeling that basically all will fall under the new requirements.

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#1215827 - 07/10/09 01:46 PM Re: Higher -Priced Mortgage Loans HELP [Re: HallieK]
Jayhawker Offline
Member

Registered: 10/06/04
Posts: 86
Our bank is not subject to HMDA ut of course we have to deal with Reg Z--so, if a loan falls under a Higher Priced Mortgage Loan does the bank have to set up and escrow account for taxes and insurance?

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#1215852 - 07/10/09 02:07 PM Re: Higher -Priced Mortgage Loans HELP [Re: Jayhawker]
Skittles Offline
10K Club

Registered: 09/10/02
Posts: 12324
Loc: KY
Yes, escrow accounts will be required.
_________________________
'Remember that today while you are safe, comfortable and warm somewhere a Kardashian/Jenner is starving for attention.' TR

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#1215931 - 07/10/09 03:17 PM Re: Higher -Priced Mortgage Loans HELP [Re: Skittles]
Georgia Plum
Unregistered


OK, I think I must be doing something wrong. I was trying to plug in the numbers from some existing loans into the new calculator to see if they would be HPML. Every one I do says NA for rate spread, yet on the OLD calculator, each does have a rate spread. Am I thinking through this incorrectly?

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#1216000 - 07/10/09 03:49 PM Re: Higher -Priced Mortgage Loans HELP [Re: ]
ktac MITCH Offline
Diamond Poster

Registered: 05/04/05
Posts: 1808
Loc: Giant side of TX
The Old Calculator is using the still existing HMDA Rate Spread Calculation = 3 and 5 over the comparable Treasury. If the spread is less than 3 or 5 it returns NA as the answer, meaning the HMDA code to report is NA.
The New Calculator is what HMDA will be going to - to match Reg Z changes for HPML = 1.5 and 3.5 over the Avg Prime Offer Rate.

To test some loans to see if they would have been HPML (if HPML had been in place when the loan was made) you need to use the New Calculator.
_________________________
My opinions are just that, and might be worth what you paid for them.

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#1216639 - 07/13/09 03:27 PM Re: Higher -Priced Mortgage Loans HELP [Re: ktac MITCH]
Georgia Plum
Unregistered


ktac Mitch, I used the new calculator, but every one I entered comes back as NA. I really thought I would see more loans that would be considered HPML. I guess I've been worrying over nothing after all.

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#1216805 - 07/13/09 06:59 PM Re: Higher -Priced Mortgage Loans HELP [Re: ]
Pounder Offline
Member

Registered: 07/16/08
Posts: 86
Our bank is not subject to HMDA so the calculator is new to us. I understand we will use the new calculator for determining HPML. My problem is knowing which APOR Table to use (Fixed or Adjustable Amoritization Type). Our bank offers 1-3-5 yr ARM's up to a 30 year term. If I use recently closed loan data on the calculator and select fixed "NA" appears, however, if I select adjustable it would be considered a HPML. Any help would be appreciated.

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#1216834 - 07/14/09 08:57 AM Re: Higher -Priced Mortgage Loans HELP [Re: Pounder]
#Just Jay Offline
10K Club

Registered: 10/26/06
Posts: 13848
Loc: Cheeseheadland
You would use the Adjustable table for Adjustable Rate Mortgages (ARM's). use the term that coincides with the initial known fixed rate period (i.e. 5 year ARM, use 5 year term).
_________________________
Well, I'm here now. What are your other two wishes?

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#1217195 - 07/14/09 04:41 PM Re: Higher -Priced Mortgage Loans HELP [Re: #Just Jay]
Pounder Offline
Member

Registered: 07/16/08
Posts: 86
Under HPML Reg Z 226.35 b (1) Repayment ability refers to repayment abilities as provided in 226.24(a)(4)(iii)(B) "Determine the consumer's repayment ability using the largest payment of principal and interest scheduled in the first seven years following consummation and taking into account current obligations and mortgage-related obligations". If you have a 1-3-5 yr ARM 30 yr term do you have to calculate your payment as a worst case scenerio during the first 7 years of the loan when calculating repayment ability? Example 1 yr arm 2/4 caps. Rate is 5.15. After the 2nd year the rate could be 9.15. Do we have to calcualte our consumer's repayment ability with this amount? If this is the case, consumer's DTI ratio can well exceed our DTI limits. I thought I read somewhere that this is only on HPML with a balloon payment. Please help!


Edited by Pound (07/14/09 04:43 PM)

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#1217760 - 07/15/09 04:23 PM Re: Higher -Priced Mortgage Loans HELP [Re: Pounder]
bigfish Offline
Junior Member

Registered: 10/04/06
Posts: 26
Loc: MI
The Official Staff Commentary to 226.34(a)(4)(iii)(B), comments iv. and v., indicate for an ARM loan you would use the sum of the index plus margin at loan consummation (the fully indexed rate)to determine the "worst case scenario." If, according to the terms of the note, the fully indexed rate is reached during the first seven years, use the payment at that rate to assess repayment ability. If the fully indexed rate is not reached during the first seven years, use the payment that corresponds to the highest rate that applies during the first seven years.

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