No High Cost Mortgages?
If you think you aren't making any high cost mortgages, you probably haven't done your homework. At some point, almost every lender either makes high cost loans or comes very close. Banks, thrifts and credit unions are no exception. No matter how responsible and fair you think your institution's lending is, remember that there are two formulas, either one of which can push a loan over the high cost limit. Interest rates may seem safely distant from the high cost mark. However, the points and fees calculation is usually the driving factor that pushes loans over the high cost edge. This is where financial institutions need to be careful. The risk is for loans with smaller principle amounts but fees based on the service rather than the loan amount Points relative to loan amount or selling credit life insurance can push a loan over the high cost limit. You should check the loan portfolio as part of your routine audit to be sure that you are on the safe side of the line. If not, put tools and procedures in place to check loans before they go to settlement.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 11, 10/05
First published on 10/01/2005