With the upcoming lending revisions, our institution is in the process of implementing and/or updating our policies/procedures. On Section 35 (higher priced loans), the decision has been made to NOT escrow. So our committee is scrambling for options. Could someone please point me in the right direction, (since we have sat in on numerous webinars and seminars, and cannot seem to find answers to our questions)... Does anyone know if can we turn a loan down just because it's a higher priced loan (since we will not be offering escrow), whereas otherwise we would have made the loan? Or, would it be deemed discriminative to adjust our APR (case by case circumstances) so that the loan will not be classified as a section 35 loan?

The Federal Reserve conference I listened in on said to be careful of 'not doing that type of loan' so that you can't be charged with disparate treatment.

I agree - If you offer the type of loans (consumer RE) but deny someone because their credit is "not excellent" & their rate would have to be higher ????????? Sounds like asking for trouble

Especially if you 'adjust APR' on a case by case basis.
Have you ran the calculations on any of your loans to see if they would be higher priced?
I was a bit surprised to see the results when I ran ours, 38% of the loans done so far this year would have been higher priced. Not what I wanted to see.

We have ran sample numbers and it's not looking good. We currently offer 3, 5 & 7 year balloons. The 3 year appears to be doable. But the 5 & 7 years are looking somewhat iffy, especially if we continue to charge our current origination fee. However management seems adamant about not escrowing. Any suggestions????

I was ready to sign up for the Escrow conference, but management said we weren't going to have any loans that qualified, yeah right. Just turned in the worksheet with the calculations so I don't know what their decision will be.
Ours are the same the 3 year balloons make the cut but any longer than that and they qualify as higher priced.
I personally don't see anyway to get out of the escrow requirement without lowering origination fees, interest rates and such.

And if you don't lower EVERYONE'S..........fair lending issue.

And if you do lower everyone's..............the bank won't make enough money to make that sort of lending worthwhile.

Gonna have to escrow......no way around it other than quit making any type of mortgage loan...period. We're just about to that throw-up-the-hands point.

I already put IT on alert that we are more than likely going to have to turn on the escrow module in the software. Just waiting on the powers that be to realize it.

Ask if they are adament about not issuing a TIL Disclosure - - why not ignore everything required by Reg Z?????
O.K. = maybe you shouldn't quite put it that way

HA!!

No.....I'd say "LISTEN TO ME, YOU FOOLS!!"

K......not really.....just funnin' around.....it' Friday. But isn't that thought a juicy one? Aren't 'ya just dyin' 'ta shout it out?

Think I'll go home and play in FarmTown.

My question is on first lien residential ARM loans.

Please confirm if this is correct: We look at the AOPR Index value (from FFIEC) and use the corresponding period to match our fixed rate period. Example: 30yr 5-1 ARM we look to the 5yr index + 1.50 and then compare to our 5-1 ARM APR. This is not a ballon but a 30yr loan term.