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#1241056 - 08/28/09 02:01 PM
Re: Regulation Z changes - 10-01-09
Bville
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10K Club
Joined: Jul 2001
Posts: 84,344
Galveston, TX
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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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#1241074 - 08/28/09 02:06 PM
Re: Regulation Z changes - 10-01-09
rlcarey
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Posts: 962
PA
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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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#1241368 - 08/28/09 04:36 PM
Re: Regulation Z changes - 10-01-09
Kari
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Joined: Jul 2001
Posts: 84,344
Galveston, TX
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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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#1241540 - 08/28/09 06:30 PM
Re: Regulation Z changes - 10-01-09
Bville
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Diamond Poster
Joined: Apr 2002
Posts: 1,677
SmallTown, USA
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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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Power Poster
Joined: Nov 2008
Posts: 4,132
Somewhere in the middle
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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?
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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Bloomington, IN
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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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Joined: Apr 2002
Posts: 1,677
SmallTown, USA
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Thanks Dan.
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#1241949 - 08/31/09 12:43 PM
Re: Regulation Z changes - 10-01-09
Bville
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Joined: Feb 2003
Posts: 962
PA
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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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The Swamp
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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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#1242000 - 08/31/09 02:12 PM
Re: Regulation Z changes - 10-01-09
QCL
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#1242122 - 08/31/09 04:41 PM
Re: Regulation Z changes - 10-01-09
Oursisnottoreasonwhy
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Posts: 2,701
PA
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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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#1242255 - 08/31/09 07:08 PM
Re: Regulation Z changes - 10-01-09
David Dickinson
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Joined: Apr 2002
Posts: 1,677
SmallTown, USA
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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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#1242442 - 09/01/09 12:27 AM
Re: Regulation Z changes - 10-01-09
Ninky
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Posts: 17,410
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Please give people a 'reasonable' 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
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Joined: Jul 2001
Posts: 84,344
Galveston, TX
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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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Gold Star
Joined: Jun 2007
Posts: 447
New England
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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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Bloomington, IN
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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.aspxNOTE: 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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