We are required to escrow on HPML loans. But is (1)is there some sort of disclosure we give the customer telling them this is a requirement? I see no reference to disclosures under HPML rules unless I missed something.

I have not seen any reference to a disclosure regarding escrow. I would just let them know that due to that Regulation you must escrow. I'm presuming you're already aware that the requirement for escrow doesn't start until April 1, 2010.

Thanks for your response. Yes, just trying to get this put together before then. Just seems odd that this will be a requirement for the HPML customer, but not others, so you would think there would be a notice or disclosure or something.

Does anybody have any suggestions for ensuring that HPML loans get set up for escrow before the loan closes? If the loan officer fails to look at the rates and realize escrow is required and it doesn't get set up, then what do we do?

We have an independent review of loans both pre-closing and post-closing to ensure that certain compliance and/or processing items are checked. This is one that we will add to the list come April 1st. We use Harland Financial Solutions "LaserPro" which checks and 'flags' those loans that are HPML; this also helps the loan officer or processor readily identify such loans.

You really do need a way to identify very early whether a 1st lien loan will need escrow due to being an HPML. It has a bearing on your GFE and early TIL disclosures. You don't want to mess around with revising those, so I suggest you have a process to make an HPML check one of the first things you do with a 1st mortgage loan that would not usually require escrow for taxes and insurance.

Oh, and don't forget about your flood determination so you'll know whether or not to include that cost too.

Thank you for the help. We have a pre and post review also so I will make sure they are watching for this (especially at first). Also I will see if our system will "flag" HPMLs. That would be great if it did.

What date do you use to test for HPML status? I know the rules say the date that the rate is locked, but we don't have rate locks. My thought is to look at the application date. Do you agree?

Someone is going to have to check on the day of closing to be sure, but I would be watching the current rates to see how close you are.

So you are saying that rate on the date of closing it what we should use to determine if it is an HPML?

If the rate is not locked prior to that point - yes. Many banks lock the rate at the time of approval, however if the rate can still float after approval, then the closing date would be the final lock date. It does not have to be an offical lock agreement with the borrower. It really depends on your practice.

Thanks for your help. Let me ask another question. We don't lock rates, but we do risk based pricing so in most every case the rate will not change before we close. In that case do i need to look at the rate the week of the application or the week of closing? Or will it really matter as long as we are consistant. My concern with waiting until we close to decide it if a HPML is that it is to late to get the escrow information together. My thought is that we could check it application to see if it is HPML and if we change the rate before it closes then we will check it again. Thanks for your help. I'm new to compliance.

We don't "lock" rates either. But once it goes to our loan committee and is approved. Barring some major change (title issues, change or addition of borrower(s), etc.), the rate at approval is the loan rate. That's the date that we are selecting to determine the APOR. But, like Randy said - it depends on your practice.

Here's my thoughts. If you don't use a lock agreement then your rate can change up to the day of closing therefore the final date the rate is set is the date of closing, or the date the loan documents are prepared. Therefore your APR is compared to APOR in effect for that date.

You either have locked rates or floating rates. Without a formal lock agreement you have floating rates. Just MHO.

I agree.

I see what you mean Dan. I just don't know how we can wait until the closing date to compare the APR to the APOR. At that point it is to late to decide that we need to escrow and get that information together before closing.

Unfortunately, this is what TIL requires. To avoid this, you'll need to make sure the rate doesn't change from when you set it. Then you can use the rate spread calculator the day you set the rate and you'll know if it's a HPML or not.

We don't use a formal agreement, but we do have a "lock-date" on our loan input sheet. If, for any reason, the rate changes during the process, the date is updated. We use the latest (most recent) date for our determination. It's rare we would have a rate change from app to closing, however (on in-house loans)

If the rate can change during the process then you don't have a locked rate and I would argue you final rate was set the date of closing.



As David stated, unfortunately TIL requires this. As an example when you complete your ETIL and the APR is 6.149 and the APOR is 5.000, you're under the 1.5 for first liens loans. On the day of closing lets say your odd days interest are longer or you have some other PPFC charge that is just a bit higher than you estimated and it brings the closing APR to 6.151. You're not out of tolerance so you don't have to redisclose for MDIA purpose but your APR is now over the 1.5 threshold therefore making it a HPML.

IMO if you are not willing to use lock agreements then you have to accept the fact your rate is not set for the last time until you close the loan because the rate has the potential to change until that date and just because it didn't does not mean the rate was set for the final time 15 days ago because you checked the rate as the date of closing and it was the same therefore the rate was left as is or IOWs it was set for the final time.

Would like to chime in here: liked the explanation of "floating" vs. "locked" rates....made that more clear for me. Thanks.