A two part question -
Customer agrees during loan discussion to open a money market account at a lower rate than our rate sheet discloses due to consideration on points and origination....
1) Is this ok?
2) Since the TIS will disclose a different rate, can a I just do a TIS addendum stating that they are taking 20 basis points lower than the stated product rate?

Thanks

Just so I understand--you are conditioning a reduction in fees on a loan to your customer's acceptance of a lower rate on a Money Market? Is the customer required to keep a minimum balance in this account to receive the lower rate? Aside from the fact you are setting a precedent for loan fees tied to Money Market rates (not just balances), I can't imagine the benefit of your doing this and can see issues with disparate treatment. As for the TISA disclosure, what are you having them sign that shows they agree with a reduction in rate? Seems very messy to start this precedent, when you could either give them a reduction in loan rate based on relationship, or just a reduction in fees. Not sure this is a good "creative lending" scenario that won't haunt you later on.

I had my own concerns as well - I don't see it as a disparate treatment issue, as the whole MMA pricing came up after the loan was done, but I think it could be hard to convince an examiner/auditor - I'm all for just leaving it alone and if our rates our too high, then just lower them....



Thanks

For discussion purposes: If you open the MMDA at a rate that's lower than normal, you have to provide TIS disclosures at the rates assigned to the specific account. You could do that my giving your regular disclosures and an additional rider with the correct (for this account) APYs. However, does your system have the ability to properly apply a separate margin on the index rate so that this account is always correctly paid?

And yes, I'd get the agreement to accept the lower rate in writing. Otherwise, some quality control type in the back room could write you up for an exception after undoing all your hard work.

All in all, not something I'd recommend.

As is already noted, you can do this. But it could easily be a nightmare on making the correct disclosures and a burden on your computer system as rate tables, fees and other issues can arise in the setup and maintenance of the account. Special handling may be constantly needed and you don't want the customer to call the bank, ask for the MMDA rate, and be told the standard rate. Then they'll claim they were ripped off because you paid them less. Also, will you watch the loan for renewals and modifications or payoffs that may trigger a change in the MMDA?

Lotsa opportunity to mess up is in this request. Seems it would be cheaper to eat the points.

yeah, that's what I advised the lender - I'm really trying to get these guys to the point that they only thing we do price variances on is our CD's - but you know lenders....

Can you say.....SUPERSTAH....