<<<If correct, than a loan to purchase a vacation home would not need to go through these tests, correct? yes, so long as it is not also secured by the borrower's primary dwelling. >>>


I thought they just changed this so that second/vacation homes are now covered.

It is easy to get confused because these are all layered, or intertwined = RESPA / MDIA part of Reg Z / and HPML part of Reg Z.

MDIA (early disclosures, redisclosure, waiting period to close) does apply to all residences owned by the borrower, as long as RESPA applies & Reg Z applies.
But HPML only applies to primary residence.

No, you can have the balloon due as the 84th payment.




That was changed for the disclosure requirements of 226.19(a) that the MDIA requirements amended. HPML and HOEPA only apply to consumer purpose loans secured by the consumer's primary dwelling.

Thanks Tigg-let and Mitch for your responses.

Dan, to touch on Compliance Poster's question about "presumption of compliance", not only can we have the balloon due as the 84th payment, but we can actually can have a balloon loan structured less than seven years (say balloon due as the 60th payment) so long as we can show that we've included the balloon payment (when termed less than 7 years) in our analysis of their repayment ability and we can support that they can make the payment (in the rare case that they have the cash flow to make the significantly larger balloon payment or where the balloon payment isn't significantly higher than the regular payment)? Am I understanding this correctly?

Thanks.

not Dan, Glutes, but yes.

For the record, however, we have our loans ballooon on the 85th month, just so as not to create any techincal problems.

Grossing up is more of a fair lending-type issue so as not to unintentially discrimate against those that have SSI benefits, or similar non-taxable income.

If your DTI are set up for gross, this becomes a pretty important factor. If your DTI limit is set up for net, then you work that accordingly.

In some ways, grossing up is more accurate because everyone does their withholdings differently. By grossing up a certain percentage, you treat everyone more equally. Also, if you claim 8 dependents and only have 1...how accurate is that net income, really?

Okay, thanks!

I had posed the following in a thread in the Marketing forum last Friday and did not get any responses. I thought I would repost it in this thread since it is more active.

"If you have an ad for credit secured by a dwelling and it includes triggering terms that require disclosure of the terms of repayment required by section 226.24(d)(2) of Regulation Z it seems you must also make the payment disclosures required by section 226.24(f)(3). How do these differ? Can anyone give me an example? Thanks."

Thanks for the repsonse joker.

Does anyone have an advertising checklist they are willing to share with changes eff.10/01/09?

Thanks.

I just want to bounce something off the group to make sure I'm telling my loan officers the right information. If they're doing a baloon payment loan for more than 7 years, and it comes up as an HPML, they CAN do the loan presuming they do the income verification, they do the repayment analysis based on the highest scheduled payment in the first seven years of the loan and they escrow if the loan is originated after April 1, 2010. I think there might have been a misconception that even if it was an HPML, that if it was over the 7 years then the regulation didn't apply. I told them that an HPML is an HPML is an HPML!!!!!

I don't know if this has already been answered in this post somewhere but...

When are payments left in the night drop assumed to have been received? For example, when the night drop is checked on Monday am, are the payments assumed to have been received on Saturday, Sunday or Monday?


36(c) Servicing practices.
Paragraph 36(c)(1)(i).
1. Crediting of payments. Under § 226.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer's loan account as of the date of receipt. This does not require that a mortgage servicer post the payment to the consumer's loan account on a particular date; the servicer is only required to credit the payment as of the date of receipt. Accordingly, a servicer that receives a payment on or before its due date (or within any grace period), and does not enter the payment on its books or in its system until after the payment's due date (or expiration of any grace period), does not violate this rule as long as the entry does not result in the imposition of a late charge, additional interest, or similar penalty to the consumer, or in the reporting of negative information to a consumer reporting agency.

We assume during that payments made during non-business hours defaults to the next business day, when we are physically in receipt of it.

So, we have an applicant who will retire within the next 5 years. After retirement, his debt to income ratio will be so severly affected that he would not qualify based on the mortgage payment. How do we state his reason for denial? I'm just a little fearful of treading into new waters.

Do you use the standard denial notice form? There is a check box on there for "Income insufficient for amount of credit requested".

I just didn't know if we needed to be more specific that it is his future income that's insufficent. Am I making this too complicated?

Quick question. You know he will retire in the next 5 years (i.e. he said so), or you anticipate he will retire in the next five years (i.e. he will be 65 so we assume so)?

He actually stated that he planned to retire within the next 5 years and he supplied his retirement income...

I would proceed then as SMQ suggested.

Anybody seen this guidance paper issued by the Fed? Would've been nice a couple of months ago so all of us Compliance folks wouldn't have egg on our face.

http://www.federalreserve.gov/boarddocs/caletters/2009/0912/caltr0912.htm

This is being discussed throughly in a different thread in the lender's forum.

We are a small community bank regulated by FDIC and senior management has decided that in some circumstances they will allow balloons less than the 7 years.

Being a compliance officer I kept reiterating that if we do that we will lose the "presumption of compliance". It seemed like that was a risk they are willing to take.

I don't know how to verify the ability to repay these shorter balloons. Do we not take into account the balloon balance at maturity or just use the regular monthly payment amount as if we would renew/refinance at maturity?

I have one HPML now (5 yr balloon) that I need immediate guidance on. This is the first HPML we have had, not to mention it being less than the 7-year.

Any suggestions/guidance would be greatly appreciated.

Here's a thread on this topic. It has a link to the Fed's recent guidance, in case you missed it.

I wanted to see what other banks are doing when a balloon note comes up for renewal, and you are unable to verify their repayment ability. We had an issue like this and our customer has been us paying on time (as well as all of their other credits), however, we can not prove their ability to repay the renewed debit due to a high debt to income ratio.
Any suggestions....