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#1259329 - 09/30/09 05:12 PM To avoid HPML's can the bank charge any fees?
Runnin' on Empty Offline
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We want to avoid making HPML's and we're trying to get our new rate sheet ready for Oct. 1st (tomorrow). We will offer limited fixed terms for varying loan amounts; nothing less than 7 years and we will charge 1% and offer NO POINTS loans.

We have Laser Pro and have started test loans. So far it seems to be working but I'm concerned I'm missing something.

Anybody else tryting this that can help me out?

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#1259433 - 09/30/09 06:20 PM Re: To avoid HPML's can the bank charge any fees? Runnin' on Empty
Dan Persfull Offline
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Bloomington, IN
How is the 1% not "points"? Be sure you are including the 1% as a PPFC in your APR calculation.
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#1259477 - 09/30/09 06:41 PM Re: To avoid HPML's can the bank charge any fees? Dan Persfull
swiggles Offline
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I'm curious as to why so many are bending over backwards NOT to make a loan that falls into the HPML category.....makes me think I'M missing something. Am I?
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#1259489 - 09/30/09 06:47 PM Re: To avoid HPML's can the bank charge any fees? swiggles
Truffle Royale Offline

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I don't think so, swiggles. I just finished writing a bulletin to that explains that there is no prohibition against making HPMLs. You just have to meet the presumption of compliance. Hope I'm not missing something either.

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#1259501 - 09/30/09 06:57 PM Re: To avoid HPML's can the bank charge any fees? swiggles
elcinoca Offline
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Elizabeth City, NC
I don't understand the reluctance either. Though it may be coming from institutions that never escrowed and perhaps insitutions that are not used to full credit and income documentation.

MarkB

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#1259510 - 09/30/09 07:06 PM Re: To avoid HPML's can the bank charge any fees? Dan Persfull
Runnin' on Empty Offline
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We "hope" to charge 1% on these loans and we're including this in when testing these loans for HPML. We understand we are permitted to make HPML's but Management has decided it's more cost effective to lower rates than to set up a Dept. to handle escrow.

I was hoping to get a response from a bank "in the same boat" to hear what they have done.

Thanks!

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#1259517 - 09/30/09 07:09 PM Re: To avoid HPML's can the bank charge any fees? elcinoca
Dan Persfull Offline
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Bloomington, IN
Quote:
I don't understand the reluctance either.


Ditto.

1. We currently fully document repayment ability, have for several years even with the "stated income" loans through Freddie.

2. We have no call provisions, other than default provisions, in our mortgage notes.

3. We have no pre-payment penalties, other than a minimum finance charge that is allowed by law and falls within the guidelines.

3. We do not make balloon loans. Haven't for at least 5 years.

4. We offer no discount or premium ARMS. They are fully indexed at the time of consummation.

5. So, why should we avoid HPMLs especially since the most of our HPMLs will be on our higher risk in house 1st and 2nd mortgage loans. Due to all the fees Freddie and Fannie are now charging we may on occasion hit a HPML in the secondary market, but it will be rare and if we do so be it. We will meet the presumption of compliance without any problems and without any major changes in our process.

6. We currently escrow.
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#1259526 - 09/30/09 07:13 PM Re: To avoid HPML's can the bank charge any fees? Runnin' on Empty
Relax Offline
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From what I understand and the testing we have done...it is going to be very hard for you to avoid Escow (HPML) all-together. There is almost no way around it. I suggest you be prepared to do some escrow. Once it is learned and you get used to it - it will be just like everthing else and become everyday ho-hum duties. And, remember, the escrow rule doesn't start until April 2010.

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#1259530 - 09/30/09 07:15 PM Re: To avoid HPML's can the bank charge any fees? Dan Persfull
AuditorK Offline
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PA
Add us to the list of banks that want to avoid HPMLs. eek

We make a lot of 5 year balloon mortgages and we don't currently do escrows.

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#1259593 - 09/30/09 07:47 PM Re: To avoid HPML's can the bank charge any fees? AuditorK
swiggles Offline
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It's true that we certainly do NOT want to escrow, but figure might as well take the plunge. Management does NOT want to monitor rates to make sure we never make one, when there's always a chance that one might slip through. Like Dan, we already document the ability to repay using third party proof. We discontinued our 5-year balloon product (across the board)....will allow a 7-year balloon, however. And we don't want to avoid charging a higher rate when a higher rate is warranted. We might outsource the escrow....don't know yet. We'll have to figure out if it will be cheaper to out source or maintain in-bank staff to handle the escrow accounts.
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#1259597 - 09/30/09 07:51 PM Re: To avoid HPML's can the bank charge any fees? swiggles
Runnin' on Empty Offline
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I think once we see how many HPML's we actually make between now and April 1st, it will be management's decision to "bite the bullet" and add more staff to those who handle the few escrow accounts we have now.

What I'm hearing it's virtually impossible to avoid. However, if someone has the "bullet proof plan" I was hoping to find, please share with me!

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#1259622 - 09/30/09 08:02 PM Re: To avoid HPML's can the bank charge any fees? Runnin' on Empty
swiggles Offline
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Really now!!......you make a $5,000 home improvement loan on a paid-for home and if it turns out to be HPML, you have to escrow! Ridiculous!!
Last edited by swiggles; 09/30/09 08:02 PM.
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#1259719 - 09/30/09 08:56 PM Re: To avoid HPML's can the bank charge any fees? swiggles
OldSchoolBanker Offline
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FL
Swiggles I agree completely that it is ridiculous that a small first lien loan can trigger escrow.

We have structured these small first lien loans to a 10yr term only as the 5yr and 15yr index levels are too low.

We will be offering the 10yr term at 6.25% and with the FFIEC index +1.50, our APR will always be low enough to protect us.
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#1260005 - 10/01/09 02:54 PM Re: To avoid HPML's can the bank charge any fees? OldSchoolBanker
Reed Offline
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West Coast
Our in house loans are all 3 and 5 year balloons, our APRs on a small percentage (maybe 10% annually) would be 1/8th to 1/4 % over HPML triggers. Managment opted to adjust rates and fees to avoid HPML. This ended up being more cost effective than offering 7 year+ balloons and dealing with escrow, which turned out to be an operational headache when we tested it on a handful of volunteers.

Will this mean more loan denials when we can't risk price? I don't know. Will there be unintended fair lending issues? I hope not. Do I agree with this method? Ask me a year from now.

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