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#1241056 - 08/28/09 02:01 PM Re: Regulation Z changes - 10-01-09 Bville
rlcarey Online
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rlcarey
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Galveston, TX
A borrower can sue over anything. However, if the bank has complied with the "presumption of compliance", what attorney is going to take the case on a contingency? If the borrower can't afford to make their house payment, they are not going to be able to afford an attorney. The real issue is with the regulators. The regulation makes verifying repayment ability an affirmative requirement, rather than making failure to verify a presumption of a violation. If you can't verify the repayment ability on loans with terms of less than 7 years, you have a direct violation of Regulation Z - period.
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Lending Compliance
#1241074 - 08/28/09 02:06 PM Re: Regulation Z changes - 10-01-09 rlcarey
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Interest rate risk managment is one reason banks are doing balloon mortgages. Some small community banks are making 3-5 year balloon mortgages because they don't offer variable rate loans and don't sell any loans in the secondary market, and at the same time don't want to keep fixed rate loans on the books for 20-30 years. I do agree though that these loans are not necessarily a good idea - given possible large increases in interest rates. Just my 2 cents.

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#1241358 - 08/28/09 04:29 PM Re: Regulation Z changes - 10-01-09 RR Joker
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We used to offer escrow, we merged with another FI and now we do not offer escrow. Can we tell customers we do not offer escrow on loans and not do any High priced mortgages? We did a survey of our loans and at this time do not have any HPM. Is there any legal way of getting out of doing HPM? Also if we have a loan with PMI (I am guess it would be a HPM)? Do we have to escrow the PMI if it isn't a HPM?

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#1241366 - 08/28/09 04:34 PM Re: Regulation Z changes - 10-01-09 Kari
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You can try to not to HPML, but it's going to be difficult. The index is so low, I don't know how any bank is going to avoid HPMLs on 1st lien loans. Therefore, if you do have a HPML, you must escrow loans closed 4/1/10 or after.

You don't have to escrow PMI, but I don't know how you would collect the money without escrowing.
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#1241368 - 08/28/09 04:36 PM Re: Regulation Z changes - 10-01-09 Kari
rlcarey Online
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Galveston, TX
Is there any legal way of getting out of doing HPM?

Sure - just set your pricing to never pull the trigger.

Do we have to escrow the PMI if it isn't a HPM?

There are no other regulations that "require" an escrow.
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#1241373 - 08/28/09 04:44 PM Re: Regulation Z changes - 10-01-09 rlcarey
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Thank you, both of you basically enforced what I thought, but my lenders are acting up. (what else is new)! So I thought a little backing might work shot of hitting them over the head with the reg changes again!

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#1241540 - 08/28/09 06:30 PM Re: Regulation Z changes - 10-01-09 Bville
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Bville,
Please provide a link to your stmt below:

In the supplementary materials it says “If the term is at least seven years, the creditor that underwrites the loan based on the regular payments (not the balloon payment) may retain the presumption of compliance.”
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#1241598 - 08/28/09 07:00 PM Re: Regulation Z changes - 10-01-09 OnTheEdge
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Somewhere in the middle
Originally Posted By: KYbanker20
If we originate a HPML, do we have to have our customers sign a notice like HOEPA? Or is the only thing required of us to require that the customer to Escrow and report on the LAR if applicable?

Originally Posted By: David Dickinson
There is no HPML disclosure. There are restrictions and requirements of the loan (like the escrow).


I had this questions posed to me the other day, so I thought this may be helpful for others too.
[size:8pt]
Edit Reason. Grabbed the wrong reply by David.[/size]
Last edited by DD Regs; 08/28/09 07:04 PM.
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#1241605 - 08/28/09 07:04 PM Re: Regulation Z changes - 10-01-09 OnTheEdge
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Page 44549 of the Federal Register / Vol. 73, No. 147 / Wednesday, July 30, 2008 / Rules and Regulations 12 CFR Part 226
Truth in Lending; Final Rule

Under § 226.34(a)(4)(iv), no
presumption of compliance is available
for a balloon-payment loan with a term
shorter than seven years. If the term is
at least seven years, the creditor that
underwrites the loan based on the
regular payments (not the balloon
payment) may retain the presumption of
compliance.
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#1241798 - 08/28/09 09:01 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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Thanks Dan.
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#1241839 - 08/28/09 09:54 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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Thanks Dan. I've been away from my desk for a few hours and wasn't keeping up with the thread.

Has anyone spelled out somewhere exactly what has changed for HOEPA? I know the prepayment penalty rules have changed and the rules for verifying repayment ability are enhanced - what else. I get my mind so into HPML I forget about HOEPA.

Also I'd like to make a chart comparing HOEPA to HPML - has anyone made one or seen one somewhere?

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#1241949 - 08/31/09 12:43 PM Re: Regulation Z changes - 10-01-09 Bville
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Originally Posted By: Bville
Also I'd like to make a chart comparing HOEPA to HPML - has anyone made one or seen one somewhere?


See pages 34-35.
FDIC Supervisory Insights

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#1241960 - 08/31/09 01:19 PM Re: Regulation Z changes - 10-01-09 AuditorK
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I find it interesting, in scanning that comparison, that HPML requires escrow, but HCML does not? Interesting.
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#1241982 - 08/31/09 01:49 PM Re: Regulation Z changes - 10-01-09 RR Joker
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Am I correct that we use the calculator here?

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

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#1242000 - 08/31/09 02:12 PM Re: Regulation Z changes - 10-01-09 QCL
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Originally Posted By: QueenChop'dLiver
Am I correct that we use the calculator here?

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



Yes

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#1242108 - 08/31/09 04:30 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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If we do 1, 3, & 5 year balloon loans where the APR does not trigger HPML by being no greater than 1.50% over APOR rate. Does that then exempt these loans from from the other HPML requirements?

Or just the fact that they are balloon loans less than 7 years they are automatically HPML's regardless of the rate?

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#1242122 - 08/31/09 04:41 PM Re: Regulation Z changes - 10-01-09 Oursisnottoreasonwhy
Deena Offline
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If the APR doesn't make the loan HPMLs, the rest of the HPML requirements will not apply.
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#1242225 - 08/31/09 06:33 PM Re: Regulation Z changes - 10-01-09 Deena
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Out West
I think I need a quick lesson on what a cooperative is. 226.35(b)(3)(ii) tells me I don't need an escrow for a HPML secured by shares of a cooperative. The commentary says an escrow is required if HPML is secured by a lien on a cooperative. I'm assuming you can either own a piece of a building with your name on the title or an entity owns a building and you can own a percentage of the entity? Sorry if this seems a bit remedial, but I just realized I know even less than I realized about cooperatives.

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#1242255 - 08/31/09 07:08 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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David,
From part of your reply on 8-27:
These two statements clearly show balloon loans that are less than seven years are acceptable. What say you all now?
I say "yeah". But I'm still confused as to whether we have to use the balloon pymt. I'm considering documenting repayment ability using the regular payment in the debt to income that we establish. (I think early-on you recommended this.) Do you think this will work?
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#1242269 - 08/31/09 07:18 PM Re: Regulation Z changes - 10-01-09 rlcarey
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RL

Where do bank's earnings come from? I would contend a very small percentage comes from generating loans for sale into the fixed rate market. The bulk comes from loans kept in the bank's loan portfolio. If the bank requires Joe Plumber to have substantial equity in the property 20% or greater (to basically share in the risk of the bank granting the loan) I believe a balloon loan could be a prudent product for Joe Plumber and a Prudent Risk for the bank to take with their depositor's funds.

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#1242401 - 08/31/09 09:23 PM Re: Regulation Z changes - 10-01-09 Oursisnottoreasonwhy
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I tried posting this under one of the other Reg Z chains, but no reponse. When it comes to the timeliness of posting payments, what are reasonable requirements? That is so subjective. Can we notify each borrower at closing "in writing" that payments made with coupon to the p.o. box listed on their coupon, will be posted the same day. Any received after 5:00 in person or on Saturday, will be posted the next business day. Can this be accomplished by a mailer to our existing customers, and add a disclosure at closing for new customers going forward? It seems like I have read that a lobby sign is not considered "in writing".

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#1242442 - 09/01/09 12:27 AM Re: Regulation Z changes - 10-01-09 Ninky
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Please give people a 'reasonable' wink chance to reply before you double post. David answered your question in the other thread.

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#1242462 - 09/01/09 02:36 AM Re: Regulation Z changes - 10-01-09 Oursisnottoreasonwhy
rlcarey Online
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I'm not sure how much a downpayment has to do with being able to afford the new payment when it comes time to refinance in a rising interest rate environment. They still potentially lose their house and possible all the equity they dumped into it.
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#1242854 - 09/01/09 04:50 PM Re: Regulation Z changes - 10-01-09 rlcarey
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Do we use the same rate spread calculator for HOEPA loans and the higher priced mortgage loans?
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#1242859 - 09/01/09 04:54 PM Re: Regulation Z changes - 10-01-09 Book Nerd
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No. HOEPA spreads are still based on the Treasury Constant Maturities where HPMLs are based on the AOPR.

Taken from the rate spread calculator located at:

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

NOTE: Do not use the rate spread calculator to calculate the HOEPA status; they are two different fields which require two different calculations. See Help for more details.
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