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#1245573 - 09/04/09 04:50 PM Re: Regulation Z changes - 10-01-09
ktac MITCH Offline
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Giant side of TX
Ski & Plum,
The FDIC article made the recommendation that to make a Balloon with a term of less than 7 years - lower the rate to keep the APR below a HPML threshold.
SO - using the same logic to avoid an HPML for escrows, would seem to be o.k.; given the potential disparate impact that you already mentioned.
BUT - IMO, the big question then becomes . . . Is the loan profitable, given you have to lower the rate to X%.
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#1245591 - 09/04/09 05:07 PM Re: Regulation Z changes - 10-01-09 RR Joker
Shelba Offline
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I have 2 questions I need to ask.

1..We do Adjustable Rate Loans based on rate change of Prime + 1 annually or every 3 yrs. But, we have a floor rate of 6% and a ceiling rate of 21%. To base repayment ability I will need to figure that on the fully indexed rate at time of loan which currently would be 4.25% or the floor rate which is 6%, is this correct??

2..How do we handle the balloon notes we have that will mature after the October 2009 changes are into effect. Some of these borrowers may not be able to acceptable document their income as required by the new Reg Z?? Will we be able to renew these and continue them as balloon notes?? Without having to document the repayment ability?????

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#1245627 - 09/04/09 05:34 PM Re: Regulation Z changes - 10-01-09
rlcarey Offline
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SkiDoo's option is the only one available - don't cross the threshold.
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#1245679 - 09/04/09 06:00 PM Re: Regulation Z changes - 10-01-09 Shelba
Dan Persfull Online
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Dan Persfull
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Originally Posted By: Shelba
I have 2 questions I need to ask.

1..We do Adjustable Rate Loans based on rate change of Prime + 1 annually or every 3 yrs. But, we have a floor rate of 6% and a ceiling rate of 21%. To base repayment ability I will need to figure that on the fully indexed rate at time of loan which currently would be 4.25% or the floor rate which is 6%, is this correct??

2..How do we handle the balloon notes we have that will mature after the October 2009 changes are into effect. Some of these borrowers may not be able to acceptable document their income as required by the new Reg Z?? Will we be able to renew these and continue them as balloon notes?? Without having to document the repayment ability?????


1. Your highest scheduled payment at the time of consummation will be based on 6% (the floor). That is the payment you will use for repayment ability.


2. You either modify the terms before the loan matures or you follow the new guidelines which means you may have to refinance them to 7 year balloons or give up the presumption of compliance.
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#1245790 - 09/04/09 07:08 PM Re: Regulation Z changes - 10-01-09 RR Joker
3-2-Go Offline
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I have looked unsuccessfully to locate the Federal Register in relation to the Reg. Z Higher Priced Mortgage Loans. I need a copy of the Federal Register (not the BOL listing). I need this copy to give to management for their reading entertainment. If someone could [b]pleeeease[/b] direct me to the correct place, I would greatly appreciate it.

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#1245796 - 09/04/09 07:15 PM Re: Regulation Z changes - 10-01-09 RR Joker
upstateNY Offline
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If this is covered in a thread, please point me in that direction. What are the requirements for considering an obligation that has only a few months until maturity in the repayment capacity? I have not seen mention of whether we have to include those or not.

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#1245797 - 09/04/09 07:17 PM Re: Regulation Z changes - 10-01-09 3-2-Go
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#1245811 - 09/04/09 07:24 PM Re: Regulation Z changes - 10-01-09 StevenD
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StevenD

Thank You SOOOOOOO much!

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#1245820 - 09/04/09 07:30 PM Re: Regulation Z changes - 10-01-09 RR Joker
MT Pockets Offline
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The ABA (in the ABA Works material on Mortgage Lending and HOEPA) makes refernce to an HPML borrower being able to assert a violation of the underwriting requirement as a counterclaim for all finance charges from closing until foreclosure action.Can one of the gurus explain how a consumer could do this or refer me to the part of Reg Z that allows the consumer to do so? I agree with another post that this could be a huge issue - and one that won't hit us for a few years when one of the HPML loans goes into foreclosure.
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#1245821 - 09/04/09 07:32 PM Re: Regulation Z changes - 10-01-09 StevenD
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Talked with loan ops today about our jumbo pricing. Our bank does not escrow and since there is no APOR consideration for jumbos, our pricing puts us in an HPML category and thus requiring escrows we don't want to do. I have read where we can't take closed end mortgage and structure as open end LOC but could we take the jumbo and make it into a first lien loan and an equity loan to prevent exceeding APOR pricinig. I have skimmed the regs once again and haven't seen anything that would prevent this or thwart our attempts to keep the rates out of HPML territory. Of course we portfolio everything. Thoughts from anyone on the acceptability of this? thanks!
Last edited by drpackrat; 09/04/09 07:51 PM.
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#1245871 - 09/04/09 08:35 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
pacar Offline
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Originally Posted By: Dan Persfull
[quote=Shelba]


2. You either modify the terms before the loan matures or you follow the new guidelines which means you may have to refinance them to 7 year balloons or give up the presumption of compliance.



I'm having a Friday moment...why would it matter when the terms were modified? Is it the whole renew / refinance thing? We've been going round and round with this...

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#1245872 - 09/04/09 08:38 PM Re: Regulation Z changes - 10-01-09 MT Pockets
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The ABA has an audio recording of part of their 8/19 Mortgage Markets Committee conference call where an attorney discussed liability issues regarding the new TILA and RESPA changes. They also have a link to the attorney's PowerPoint presentation. I believe he said that a consumer can be entitled to "all finance charges" under section 130(a)(4) of TILA for violations of section 129 ("materiality" requirement). He said that a consumer could be entitled to all interest, all points, all origination fees, etc. He said that this is worse than rescission because they don't have to pay back the principal on the loan.
http://www.aba.com/Solutions/Mortgage_Committee.htm

You need to have access to the ABA's members only section in order to access the audio file and the PPT.
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#1245901 - 09/04/09 09:10 PM Re: Regulation Z changes - 10-01-09 Reads Regs
Dan Persfull Online
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Previous post

FWIW Zaibatsu is an attorney, but as he said this opinion is unofficial.
Last edited by Dan Persfull; 09/04/09 09:11 PM.
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#1245948 - 09/04/09 09:56 PM Re: Regulation Z changes - 10-01-09 Dan Persfull
MT Pockets Offline
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Perfect. Thank you very much.
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#1245962 - 09/04/09 10:41 PM Re: Regulation Z changes - 10-01-09 AuditorK
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On comparing the initial APR of the to the APOR, when we originate an ARM with a discounted initial rate the APR is lower than the actual interest rate. This is due to the calculation based on the loan repricing at a lower rate (current prime plus 1 or 2 points).

If the initial APR based on the 20 or 30 year term is less than the APOR, is the loan not considered an HPML?

or are we supposed to calculate an APR on the first payment stream only to compare to the APOR?
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#1246017 - 09/05/09 01:11 PM Re: Regulation Z changes - 10-01-09 2Confused2go on
rlcarey Offline
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A loan only has one APR and that is what is compared to the APOR.
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#1246022 - 09/05/09 03:54 PM Re: Regulation Z changes - 10-01-09 2Confused2go on
ktac MITCH Offline
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ktac MITCH
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Giant side of TX
Originally Posted By: Princess Warrior
On comparing the initial APR of the to the APOR, . . . or are we supposed to calculate an APR on the first payment stream only to compare to the APOR?

As Randy said - A loan only has 1 APR.
Use the APR on your Early TIL as your first determination of whether the loan will likely be a HPML
Go to The FFIEC Calculator and enter the info to get the Official Answer = let it compare to the appropriate APOR.

Once you continue the underwriting process, the date you lock the rate may be dirrerent and the Final APR may vary some - So use the calculator again with the Rate Lock Date and APR from the Final TIL.
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#1246061 - 09/07/09 11:29 PM Re: Regulation Z changes - 10-01-09 RR Joker
jlroberts Offline
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New to this forum - not sure how to ask a question but here goes..

I thought I understood the HPML rules but now I am confused. What rate do I use to determine if my loan is a HPML? The APOR on the date the rate is locked or the PMMS as of the 15th of the month prior to the loan application date. OR are they two different calculations for two different purposes?

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#1246065 - 09/08/09 12:22 AM Re: Regulation Z changes - 10-01-09 jlroberts
rlcarey Offline
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I would suggest that you compare the APR on the early TIL to determine whether or not you have the potential of a HPML. The final TIL should again be compared to make sure things have not changed. The APORs can be found here:

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

You use the "as of the date the transaction’s interest rate is set (or “locked”) before consummation."
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#1246105 - 09/08/09 01:30 PM Re: Regulation Z changes - 10-01-09 drpackrat
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Would splitting my jumbo loan which puts us in an HPML situation (we don't escrow and don't want to) into a first and a home equity loan where neither rate would be an HPML be a problem? I haven't seen anything in the regs or had anyone reply to my Friday question. Thanks so much.

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#1246110 - 09/08/09 01:40 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
DebbieC Offline
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Owensboro, KY USA
I thought the 7 yr balloon restriction was for Sec 32 loans and not for HPML? At least that is the way the Supervisory Insights Summer 2009 reads to me. Sec 32 loans are not going away, right? We're just adding HPML.

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#1246119 - 09/08/09 01:49 PM Re: Regulation Z changes - 10-01-09 ahkcompliance
DebbieC Offline
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Owensboro, KY USA
I thought the 7 yr balloon restriction was for Sec 32 loans and not for HPML? At least that is the way the Supervisory Insights Summer 2009 reads to me. Sec 32 loans are not going away, right? We're just adding HPML.

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#1246200 - 09/08/09 02:48 PM Re: Regulation Z changes - 10-01-09 DebbieC
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Section 32 of Reg. Z (HOEPA) is still going to be there 10/1/09 but has some enhancements.

Section 35 of Reg. Z (HPML) is new as of 10/1/09.

The part of the Supervisory Insights that discussed the issue of loans that balloon less than 7 years, has to do with the new Section 35 higher priced mortgage loans. A quote from teh beginning of that section (emphasis added)...
Quote:
Where a higher-priced mortgage loan has a fixed monthly payment for the first seven years concluding with a balloon payment, a mortgage lender may, for purposes of the presumption, determine the consumer’s repayment ability by considering the amount of the consumer’s fixed monthly payment. But where a balloon payment comes due before the end of seven years, the balloon payment must be considered in determining repayment ability, in effect, prohibiting higher-priced mortgage loans with balloon payments due in less than seven years in almost all cases...
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#1246213 - 09/08/09 02:54 PM Re: Regulation Z changes - 10-01-09 CalifDreamin
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With the changes I know there is guidance on how to get "presumption of compliance." In an article I read it states "Creditors are not required to meet the presumption of compliance test but doing so provides the bank some protection for both a compliance standpoint and legal risk?"

My question is what would the ramifications be if a credit did not meet the presumption of compliance?

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#1246826 - 09/08/09 10:04 PM Re: Regulation Z changes - 10-01-09 drpackrat
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I'm looking for some help on the jumbo loan pricing issue also - has anyone gotten any guidance on these? They tend to be priced a bit higher than other conventional loans.

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