To me that means you can't rely on the value/sale of the collateral for repayment of the loan. I think the rental income can be considered.

If a customer owns a house free and clear, and gets a loan secured by the home, wouldn't the bank add 1.5% to the APR to determine if the loan was HPML?

If a customer owns a house (primary dwelling) free and clear, and gets a loan secured by the home, wouldn't the bank add 1.5% to the APR to determine if the loan was HPML?

No. The 1.5% would be added to the applicable APOR.

For simplicity and error reduction, use the calculator.

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

Ditto.

Dan, Sorry, I did mean add the 1.5% to the APOR. Just needed to clarify that a first is a first. A lender is saying that on a primary residence owned free and clear you would treat it as a subordinate lien and add 3.5% to the APOR.

You are correct. HMPL is about lien position, not the title of the product.

Does anyone have any language they would be willing to share that they've used to notify their customers of the cut-off times for payments? How did you accomplish this? Separate letter, Statement message, etc.

Ha....I wish I had the answer.....still struggling with it. To me, the regulation pretty much infers that if a customer hands a payment to anyone at any branch while that branch is open for business, the payment has to be credited as of that day. There's really no requirement to notify the customer. I don't see what purpose notification would serve. If you make your "cut-off" earlier than when your facility closes and a customer brings in a payment after that time, what leg does the bank have to stand on???? The regulation says to credit as of the "date of receipt"....no definition provided. We're thinking we might just not charge late fees on loans secured by the borrower's principal residence. But what about a report to a CRA? We're a big bank. Asking after hours and saturday tellers to somehow monitor this will NOT work.

Does everyone at your bank cut over midday?

Do you leave a new accounts drawer open for the day? Could you just run the payments through that perhaps?

You know, I can understand not allowing a midday or early cut off time; but not allowing a 4:00 or 5:00 cutoff is beyond comprehension.

We do a cutoff with our drive-ins when we close our lobbies and all transactions are next day. Doing this allows the bank to process, balance and transmit to Fed in a timely manner while still serving the needs of customers. It's rules like this that make you just want to close the doors, shut the drive-in and say too bad, come when it is convenient for us!

Sorry -- rant over.

I'm not sure where folks are getting that we can't establish cut-off times. The OSC specifically allows reasonable cut-off times. The 5:00 p.m. cut-off that was deemed reasonable was for mailed payments. I think you can have an earlier cut-off for payments made over the counter - as long as it's still reasonable.

Paragraph 36(c)(2).

1. Payment requirements. The servicer may specify reasonable requirements for making payments in writing, such as requiring that payments be accompanied by the account number or payment coupon; setting a cut-off hour for payment to be received, or setting different hours for payment by mail and payments made in person; specifying that only checks or money orders should be sent by mail; specifying that payment is to be made in U.S. dollars; or specifying one particular address for receiving payments, such as a post office box. The servicer may be prohibited, however, from requiring payment solely by preauthorized electronic fund transfer. (See section 913 of the Electronic Fund Transfer Act, 15 U.S.C. 1693k.)

And who's to say what's reasonable? The examiner most likely!! Why can't they provide something more concrete? Our cut-off time for deposits is at 3PM. Is that reasonable? And so if a customer's drop-dead 10th day to avoid a late charge is on a Saturday and he/she brings in the payment to a branch that is open on Saturday, that customer is going to expect the payment to be credited as of that day.

Refer back to this thread....

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1253213#Post1253213

Has anyone had concerns raised by lenders of private client customers? If you have a customer with a $1 million loan who has over $3 million in verifiable assets, etc. and you want to do a balloon loan less than 7 years how are you handling that if it is a HPML? My understanding is that repayment would have to be based on the balloon payment and we would not have the presumption of compliance. Is that correct? If the customer has the means to repay the balloon, is that something to be concerned about? Someone also mentioned to me that there could be fair lending concerns since we would be offering a product that not everyone would qualify for. Appreciate your thoughts.

As long as the home's value is not part of the 3 mil, and you can show that you have taken the steps to verify and show that they in fact do have assets at time of consummation to satisfy the balloon payment, then you should be fine.

Keep in mind too, escrow. These types of clients often do not want an escrow account, but there are no outs here, nor can they buy their way out of an escrow.

So presumption of compliance is not a factor? Also, just to clarify for me - if we originate a HPML loan but escrow isn't required until 4/2010, we wouldn't have to go back and set up escrow would we?

No you would not have to go back and set up escrow for those loans made between 10/1/09 and 3/31/10.

Quick question (sorry if this is has been asked before):

To test if the loan is a high priced mortgage loan (HPML), is the new rate spread calculator adequate to make that determination? If the calculator produces a response (number) other than 'NA', does that mean we have an HMPL?

Thanks.

You are correct.

*rant warning*
With regard to the calculator, I've had so many calls asking where the answer comes up. Why the heck couldn't the government put that in bigger font and maybe red when it's actually numbers, not just NA?!!!

ok, rant over.

Thanks for the quick response David.

I agree TR. Nonetheless, I'm just appreciateive that they are providing a calculator to begin with, but since they are, it would be nice if they provided the result in a "clear and conspicuous" manner. (Pleae note that in no other forum, conversation etc, would I ever use the words "clear and conspicuous". Just seemed appropriate to use here.)

Other quick question on the excemptions of HOEPA loans and HPML's.

Am I clear with my understanding here:

HOEPA mortgage rules do not apply to "residential mortgage transactions" which are loans for the purchase or construction of a consumer's principle dwelling...

While HPML's do apply to loans for the purchase of a consumer's principle dwelling but not for the initial construction of a dwelling?

Are the HPML exemptions meant to exclude what HMDA excludes?

Thanks!

I apologize if this question has already been asked, and I need a response fairly quickly as I have a Loan Department that wants to make a loan. I know we cannot do a balloon loan if the loan will be a higher priced mortgage loan, but what if you run the rate spread calculator for a balloon loan and the loan will not be a higher priced mortgage loan (answer = NA). Can we still do a balloon loan in that instance? I have been under the impression that we can no longer do balloon loans for consumer primary residence loans, but it seems like we could do one if it is not a higher priced mortgage loan.