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#1258064 - 09/28/09 07:40 PM
Re: Regulation Z changes - 10-01-09
David Dickinson
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Diamond Poster
Joined: Jan 2004
Posts: 1,621
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David: ok, refinance vs renew issue here. My understanding is "renew" is very narrowly defined by regulators. Our FDIC regulators seem to look at 226.20 and say that it is a renewal only if it falls within the 5 renewal examples given in 226.20. So the classic example of renewing a 5 year note for another 5 years would be treated as a refinance not a renewal.
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#1258066 - 09/28/09 07:44 PM
Re: Regulation Z changes - 10-01-09
David Dickinson
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New Poster
Joined: Sep 2009
Posts: 6
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I have a question that I am not sure has been addressed. When evaluating for a higher priced mortgage loan, if the borrower qualifies for the initial payment amount, but does not qualify for the highest payment they could have over the initial seven year period, I assume that you would have to send an adverse action letter turning them down for debt to income ratio. Does this sound correct?
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#1258069 - 09/28/09 07:48 PM
Re: Regulation Z changes - 10-01-09
Burgess
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Power Poster
Joined: Apr 2001
Posts: 4,828
Between the lines
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And what about my post on extend or modify, agree or disagree?
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#1258164 - 09/28/09 09:10 PM
Re: Regulation Z changes - 10-01-09
Burgess
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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David: OK, refinance vs renew issue here. My understanding is "renew" is very narrowly defined by regulators. Our FDIC regulators seem to look at 226.20 and say that it is a renewal only if it falls within the 5 renewal examples given in 226.20. So the classic example of renewing a 5 year note for another 5 years would be treated as a refinance not a renewal. Queen & Burgess: Renewal vs. refinance is a legal issue. ยง226.20(a) states a refinance is a new obligation that satisfies/replaces/extinguishes a previous loan. (BTW, HMDA and RESPA say the same thing). If the "new" loan doesn't do this, it's not a refinancing (although there are a few exceptions). Burgess: Your examiners are clearly in the wrong here. Those 5 things in Reg Z say "even if it is replaced, it's still not a refinancing". We've discussed this issue several times here at BOL.
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#1258258 - 09/29/09 08:50 AM
Re: Regulation Z changes - 10-01-09
David Dickinson
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100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
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Ok, i have a situation that i am concerned about.
I attended a seminar where one of the speakers provided a solution to doing balloon loans. Many of the small banks in my area are considering or have made the decision, based on the speakers' recommendation that the following would be in compliance, to go with the stated solution:
In the FED box of the note state, example: We are NOT required to refinance this loan, however, if a decision is made to refinance this loan, the rate will not exceed 9.0% during the first 7 years.
for example: a 3 year balloon, amortized over 180 months. Calculate the balloon, take the balloon and use the highest rate as stated in the note (9.0%), in this example - recalcuate using the remaining amortization schedule. (balloon amount x 9.% / 144)= it is understood that this would be the highest P&I payment.
My arguement - using the statement we are NOT...means we are stating we may not refinance the loan and in that case, the highest P&I payment would be the balloon. so, to me the balloon is just not possible.
Management at my bank also agrees with me - but i want to make sure we are not missing the opportunity to continue balloon loans less than 7 years.
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#1258287 - 09/29/09 12:29 PM
Re: Regulation Z changes - 10-01-09
Tryin-2-Comply
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10K Club
Joined: Jul 2001
Posts: 84,319
Galveston, TX
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I agree, unless the conditions for refinancing the loan is totally under the control of the borrower, this is just a balloon loan - period.
I hope the speaker was an attorney and if he put this recommendation in writing, that he has plenty of errors and omissions insurance.
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#1258380 - 09/29/09 01:54 PM
Re: Regulation Z changes - 10-01-09
rlcarey
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Platinum Poster
Joined: Apr 2005
Posts: 684
Jersey Shore
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Tax Returns - we have never used the 4506T's and may start to as it seems the easiest way to verify for self employed - How long does it take to get the report once it is requested? Is there a cost involved?
Also, please tell me I'm right - the 10/01/09 chenges Do NOT apply to a second home just the primary.
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#1258393 - 09/29/09 02:02 PM
Re: Regulation Z changes - 10-01-09
Jerseygirl
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100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
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Thanks for the response - no, he isn't an attorney - he is well known and I am really surprised that he stuck his neck out there for this.
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#1258417 - 09/29/09 02:20 PM
Re: Regulation Z changes - 10-01-09
Truffle Royale
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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DAvid, I'm not following the conversation with you and Burgess...please help clarify this for me. Within the exceptions to "refinancing" in .20(a), the first one (not considering #2-reduction in rate/payment) refers to single pay loans...if the 5-year loan was not a single pay...then I would think it would be a refinance, not a "renewal".
(1) A renewal of a single payment obligation with no change in the original terms.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1258470 - 09/29/09 03:14 PM
Re: Regulation Z changes - 10-01-09
SwimRobin
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New Poster
Joined: Sep 2009
Posts: 6
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I have a question that I am not sure has been addressed. When evaluating for a higher priced mortgage loan, if the borrower qualifies for the initial payment amount, but does not qualify for the highest payment they could have over the initial seven year period, I assume that you would have to send an adverse action letter turning them down for debt to income ratio. Does this sound correct? I did not notice that this questioned had been answered. Can anyone help?
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#1258497 - 09/29/09 04:00 PM
Re: Regulation Z changes - 10-01-09
SwimRobin
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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That would fit in the category of inability to pay unless you have other mitigating factors, so in and of itself, I would say you...you would decline the request.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1258565 - 09/29/09 04:49 PM
Re: Regulation Z changes - 10-01-09
P*Q
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Thankfully (at least so far) we don't list APR's on our website, or print ads, for that matter.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1258585 - 09/29/09 05:09 PM
Re: Regulation Z changes - 10-01-09
Beth175
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Member
Joined: Dec 2006
Posts: 56
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I have a question regarding calculating repayment ability for an ARM Loan. If I have an ARM loan that is fixed for five years and I am calculating repayment ability do I use the payment amount or the maximum amount the payment can be repriced to?
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#1258622 - 09/29/09 05:42 PM
Re: Regulation Z changes - 10-01-09
KYbanker20
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Platinum Poster
Joined: Nov 2005
Posts: 614
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KYbanker - you would look to the highest payment given in the payment stream in the Fed Box for the first 84 months.
I have a question about the whole renewal/refinance issue- all the above posts have really confused me. Due to all the changes to Reg Z we are looking at changing how we handle balloon loans when they mature. We currently take a new app, give new disclosures, new note, etc- just like a new loan thus making all the changes applicable. We are currently looking to start doing modifications for those loans for change to rate, payment amount and maturity date - not a new obligation. I have read 226.20 and the commentary and am even more confused.
So I guess my question is - if we modify the terms and do not get a new note then we do not have to redisclose and all the waiting periods and HPML issues would go away on these loans? I really did think I understood all of it, but now I have no idea.
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#1258715 - 09/29/09 07:11 PM
Re: Regulation Z changes - 10-01-09
Truffle Royale
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Gold Star
Joined: Nov 2003
Posts: 277
East Texas
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Marie R, I hear you!! I just keep finding questions that relate to this fun. We do modifications and extensions at the end of our balloons. Thought I understood it, too, but I'm as confused as you are. Maybe someone will clarify it for us.
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#1258765 - 09/29/09 07:55 PM
Re: Regulation Z changes - 10-01-09
P*Q
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Gold Star
Joined: Sep 2009
Posts: 296
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I logged into BOL to ask a question about renewing loans that mature and how the Higher Priced Mortgage Loan requirements apply. I happened across the post above from MarieR which is sort of my question. For mortgage loans that are maturing, if the bank modifies, amends prior to maturity, do the MDIA requirements apply? And, can the bank renew on substantially the same terms or would a balloon loan for example now qualify as a Higher Priced mortgage loan requiring the bank to reevaluate collateral, collect paystubs, tax returns, etc?
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#1258802 - 09/29/09 08:27 PM
Re: Regulation Z changes - 10-01-09
drewella
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Power Poster
Joined: Apr 2001
Posts: 4,828
Between the lines
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drewella, if you do a modification and do not have a new note, HPML does not apply. We are only doing this for our workout loans so as not to appear to be circumventing the regs.
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