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#1243187 - 09/01/09 09:12 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
ahkcompliance Offline
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OK- I want to make sure I understand this correctly.

If our loan is considered a HPML...On a 3 or 5 year balloon we need to take into consideration all payments including the balloon when calculating the ability to repay the loan. If we did a 5 year ARM we would need to take the highest rate in the first seven years intial rate for five years and then the yearly cap to figure out the highest payment and use that payment for the entire 7 years. (For example, five year ARM now 5.99, year 6 could jump 2.5 and year seven jump another 2.5. So we need to use 10.99 when figuring the payment for the first seven years.)

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#1243206 - 09/01/09 09:39 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
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akhcompliance

if indeed your loan is a HPML, your statements are correct as to the balloon and the ARM. If it is not a HPML, you are safe and these criteria do not apply, other than your lending policy to suitability as well as safety and soundness.
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#1243215 - 09/01/09 09:45 PM Re: Regulation Z changes - 10-01-09 OldSchoolBanker
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Thanks for the information.

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#1243454 - 09/02/09 02:30 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
Dan Persfull Online
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Quote:
If we did a 5 year ARM we would need to take the highest rate in the first seven years intial rate for five years and then the yearly cap to figure out the highest payment and use that payment for the entire 7 years.


The ARM payment only has to be based on the fully indexed rate at the time of consummation. From the Commentary to 226.34(a)(4)(iii)(B):

iv. Variable-rate loan with discount for five years. A loan in an amount of $100,000 has a 30-year term. The loan agreement provides for a fixed interest rate of 7.0 percent for an initial period of 5 years. Accordingly, the payment scheduled for the first 5 years is $665. The agreement provides that, after 5 years, the interest rate will adjust each year based on a specified index and margin. As of consummation, the sum of the index value and margin (the fully-indexed rate) is 8.0 percent. Accordingly, the payment scheduled for the remaining 25 years is $727. The creditor will retain the presumption of compliance if it assesses repayment ability based on the payment of $727.
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#1243478 - 09/02/09 02:48 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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can you send me the link? My bookmarks got deleted somehow....

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#1243503 - 09/02/09 03:08 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
Dan Persfull Online
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Click on Read A Reg at the top of the thread.
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#1243790 - 09/02/09 06:18 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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For some reason I am just not getting the grasp on this 7 year payment. I understand for balloons.

If we have a 5/1 year ARM. I know the payment for the first five years. On our TIL gives the payment for 60 months and then will give anotehr payment stream like 300 payments of XXX beginning XX/XX/XX (5 years from first payment). Would we use the highest payment of the two payment streams. The more I read, the more I get confused smirk

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#1243806 - 09/02/09 06:34 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
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What could the P&I be at the onset of year 7. If that is higher than the first 5years and the 6th year, then use that one.
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#1243808 - 09/02/09 06:35 PM Re: Regulation Z changes - 10-01-09 RR Joker
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You have a discounted rate which is what is illustrated in my above cite. If you use the payment shown for the fully indexed rate it would meet the requirement for the presumption of compliance. Let's say the fully indexed rate won't be reached until the second rate change due to a cap. Your stream will look similar to:

60 X $100
12 X $125
288 X $175

You would use the $175 for repayment ability.
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#1243826 - 09/02/09 06:46 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
ahkcompliance Offline
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I think our loan processing software will calc. for us it looks like. We just need the update. We use ARTA, does anyone else?

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#1243999 - 09/02/09 08:07 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
MarieR Offline
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Okay- I have what I think is an easy question- I just can't get the answer out of my head.

The changes to servicing and misrepresentation of dwelling value apply to all loans that are subject to Reg Z and the principal dwelling right? Or would this include collateral of a second home like MIDA did?

Thanks-
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#1244170 - 09/03/09 02:35 AM Re: Regulation Z changes - 10-01-09 MarieR
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MarieR - The MDIA rule prohibiting the coercion of appraisers and misstatements of value is directed at loans secured by the consumer's principal dwelling--HOWEVER-- the FDIC in particular has made it clear that they may cite any loan where this appears to have happened based on the FTC's Section 5.

They are most certainly on the look out for issues with the appraisal process on any loan.
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#1244278 - 09/03/09 01:23 PM Re: Regulation Z changes - 10-01-09 Tigg
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Would this be an HPML? We have a loan for a mobile home, no land, we have a first lien but it is priced and set up on our system as a consumer installment loan but is HMDA reportable. If the rate exceeds the APOR by 1.5% will we now be required to document ability to pay, verify income with 3rd party documentation and escrow for the hazard insurance?

Thanks for any help with this one, I am having trouble getting a good understanding on this type of loan.

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#1244305 - 09/03/09 01:52 PM Re: Regulation Z changes - 10-01-09 Beth175
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Beth: Yes, this loan could be subject to HPML requirements. Land is not a requirement. If this is their primary dwelling, and the APR exceeds the APOR by 1.5/3.5%, it is a HPML.

Version 8.0 of our Real Estate Matrix (now available at our website) illustrates applicability of the HPMLs. You can find it here:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm
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#1244843 - 09/03/09 06:10 PM Re: Regulation Z changes - 10-01-09 RR Joker
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I have a question about the FFIEC Rate Spread Calculator.

I have a covered loan that has a preferred employee rate for as long as the employment lasts. If they leave the bank, the rate will adjust upward. Of course, they can leave the bank the day after receiving the loan. The instructions state that if the loan term (the period until the first scheduled rate reset)is less than 6 months to use a "1".

In the above situation, in the calculator, under Loan term, would I choose variable term and then use 1?

Thanks.
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#1244861 - 09/03/09 06:30 PM Re: Regulation Z changes - 10-01-09 dottiec
Dan Persfull Online
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I would treat this loan as a fixed rate loan for the rate spread calculation. The rate has no schedule adjustments. It only adjusts if a certain event takes place.
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#1244896 - 09/03/09 06:58 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
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I agree.
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#1244986 - 09/03/09 08:19 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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I have a question about record retention for the information you obtained to verify their repayment ability. We will obtain a tax return from customer's at the time a loan is made to determine income (we are an agricultural community). In the past, we have only kept the last two years returns in the credit file and destroyed old ones. If we make a HPML, I believe we will now be required to keep that initial tax return obtained to verify income for two years after that real estate loan pays off. This could be a nightmare to keep track of these items and especially when they come in and get new loans all of the time. Does anyone have any thoughts about the record retention for the items you obtain to determine repayment ability????

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#1245026 - 09/03/09 08:38 PM Re: Regulation Z changes - 10-01-09 Farm Girl
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Does a HPML include purchase, refi and home equity loans secured by the borrowers principal dwelling?

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#1245043 - 09/03/09 08:46 PM Re: Regulation Z changes - 10-01-09 Dlynn58
David Dickinson Offline
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Originally Posted By: Dlynn58
Does a HPML include purchase, refi and home equity loans secured by the borrowers principal dwelling?

Yes.
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#1245045 - 09/03/09 08:47 PM Re: Regulation Z changes - 10-01-09 David Dickinson
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Thanks David

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#1245101 - 09/03/09 09:12 PM Re: Regulation Z changes - 10-01-09 RR Joker
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I went over this today with the main retail lender and was asked if there is anything that prevents us from changing the rate once we determine it would be a HPML? My first thought is our loan policy, but she said she would just get an exception to policy.

So other than possible discrimination or disparate impact, what other reasons can I give for why we shouldn't just change the rate? We are trying to avoid escrows because we are too small to handle them.
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#1245104 - 09/03/09 09:13 PM Re: Regulation Z changes - 10-01-09 Dlynn58
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Quick question regarding Crediting of Payments:

Comment for 226.36(c)(2)(3) states in the implied guidelines that a payment can be made any time during normal business hours.

Our Drive Up is open late most nights, and the tellers accept many payments. These would, under today's practices, be credited on the following business day as part of normal posting.

Am I correct in assuming that, unless we specifically state a cutoff time in writing, these payments received after hours should be pulled out so they can be manually backdated to the date of receipt?

How are the rest of you approaching this? And how about payments left in the Night Drop?

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#1245128 - 09/03/09 09:28 PM Re: Regulation Z changes - 10-01-09 Dlynn58
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Section 226.35(a) (3) Notwithstanding paragraph (a)(1) of this section, the term ``higher-priced mortgage loan'' does not include a transaction to finance the initial construction of a dwelling, a temporary or ``bridge'' loan with a term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months, a reverse-mortgage transaction subject to Sec. 226.33, or a home equity line of credit subject to Sec. 226.5b.
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#1245564 - 09/04/09 04:41 PM Re: Regulation Z changes - 10-01-09 StevenD
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SkiDoo, we are in the same boat. Too small and don't make enough consumer loans to get into escrowing. Any guru have an opinion?

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