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#1353979 - 03/08/10 08:55 PM HPML Balloon
vaforlovers Offline
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Joined: Nov 2004
Posts: 107
Can anyone point me to guidance on how to calculate the repayment ability on a 5 year balloon loan?

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Lending Compliance
#1353991 - 03/08/10 09:07 PM Re: HPML Balloon vaforlovers
rockchalk02 Offline
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See the July 30, 2008 Federal Register on page 44612 in the 3rd column. This gives the safe harbor rules for the repayment ability on balloon loans. Hope this helps.

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#1354013 - 03/08/10 09:24 PM Re: HPML Balloon rockchalk02
Dani York, CRCM Offline
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Dani York, CRCM
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http://www.fdic.gov/regulations/examinations/supervisory/insights/sisum09/examiners_desk.html

18 For example, see FDIC’s Supervisory Policy Statement on Predatory Lending, http://www.fdic.gov/news/news/financial/2007/fil07006a.html. “Predatory lending involves ... making unaffordable loans based on the assets of the borrower rather than on the borrower’s ability to repay an obligation.” In its comment letter to the Federal Reserve on the 2008 Regulation Z amendments, the FDIC expressed its belief that the Federal Reserve should eliminate the safe harbor and stand firm in requiring lenders to adequately verify borrowers’ income and assets. Specifically, the FDIC wrote, “Verifying a borrower’s income and assets is a fundamental principle of sound mortgage loan underwriting that protects borrowers, neighborhoods, investors, and the financial system as a whole.... Requiring borrowers to document their income will make it far less likely that consumers will receive loans that they cannot afford to pay. Documentation also will provide the markets with greater confidence in the quality of pools of higher-priced (and nontraditional) mortgage loans and their projected income streams. Thus, both consumers and the economy as a whole will benefit.” See http://www.federalreserve.gov/SECRS/2008/April/20080409/R-1305/R-1305_1075_1.pdf.

http://www.fdic.gov/news/news/financial/2007/fil07006a.html

If you are FDIC, read these. I attended a seminar where the presenter indicated that the FDIC not only looks at DTI calculations and verification docs, but also if the vorrower would be able to refinance once the loan matured (would they qualify for the refi, be able to afford the closing costs, etc).
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I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1354016 - 03/08/10 09:27 PM Re: HPML Balloon rockchalk02
vaforlovers Offline
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Joined: Nov 2004
Posts: 107
Actually we don't fit any of those examples.

We are a fixed rate 5 year balloon that amoritizes over 30 years.

Any reference?

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#1354021 - 03/08/10 09:30 PM Re: HPML Balloon vaforlovers
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
At that seminar, the presenter indicated that the FDIC stance of repayment and refi ability would apply to any balloon of less than 7 years.

On balloons less than 7 years, you also have to use the highest payment amount possible for the loan in your DTI calculation.
Last edited by Dani York; 03/08/10 09:31 PM.
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.

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#1354278 - 03/09/10 03:35 PM Re: HPML Balloon Dani York, CRCM
rockchalk02 Offline
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Joined: Jul 2009
Posts: 187
maybe look at section 226.34(a)(4)(iv)(B)?

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