Okay.....am I understanding this new rule correctly....that it allows lenders to completely ignore the new rules and continue to treat jumbo loans the same as other HMPL loans?

I'm not sure I follow the question, but you can require escrow any time you want regardless of rate spread. The new rules only mandate when you are required by regulation to set up an escrow and for jumbo loans that mandate does not kick in until the rate spread is 2.5% or greater.

My understanding is that jumbo loans have a 2.5 HPML threshold whereas a regular loan subject to HPML has a 1.5 point threshold.

Has anyone heard if they'll amend the FFIEC Rate Spread Calculator to represent these changes?

Why would they?

From my understanding the rate spread calculation would not be different than it is now for first lien loans. The FI would have to have procedures in place to recognize that for non jumbo loans the threshold is 1.5 and for jumbo loans it's 2.5.

I'm not saying they won't but I personally don't see the need for it.

It my understanding that this will only exempt Jumbo loans with a 2.5 threshold from HPML escrow requirement not the HPML status completely. The loan would still be and HMPL correct? Can we require escrow across the board for all HMPL loans even with this new rule?

You can require escrow for any loan you wish to. In the "old" days, the vast majority of mortgages were escrowed.

I would think there would be a question about the amount of the loan. This will change every year (as the definition of "Jumbo" changes). If the loan amount I enter qualifies as a Jumbo Loan, then the calculator would use 2.5% rather than 1.5% to determine if I have a HPML.

I see your point but guess I'm just thinking to simple.

The APR is still compared to the same APOR so that was my thinking of why would the calculator be updated.

My procedures update would be simple:

Rate Spread Thresholds for HPML:

First Lien Loans:
a) Conventional - 1.5% or greater
b) Jumbo - 2.5% or greater.

Subordinate Lien Loans: 3.5% or greater.

in repsonse to
I would think there would be a question about the amount of the loan. This will change every year (as the definition of "Jumbo" changes). If the loan amount I enter qualifies as a Jumbo Loan, then the calculator would use 2.5% rather than 1.5% to determine if I have a HPML.


It my understanding that this will only exempt Jumbo loans with a 2.5 threshold from HPML escrow requirement not the HPML status completely. This exemption is for the escrow requirement of HPMLs not HPML all together.

David, it would be too complicated in the event you might be loaning in a high cost area. The amount for JUMBO loans isn't 417,000 across the board and the way the rule reads to me, they retained that variance.

What I don't like is the risk a LO will confuse the higher allownance that only exempts the escrow requirements, to exempt it from HPML all together...we won't be acknowledging this change except perhaps on a case-by-case basis.

So, let me try to wrap my head around this, jumbo loans ($417,000 and up - 1st mortgages, right) have a higher tolerance of 2.5%, but that is only for the escrow requirements. All other requirements apply at 1.5%?

From page 11321 of the final rule:

Comment 35(b)(3)(v)–2 clarifies that the
higher APR threshold applies solely in
determining if a ‘‘jumbo’’ loan is subject
to the escrow requirement. The
determination of whether ‘‘jumbo’’ first lien
loans are subject to the other
protections in § 226.35, such as the
ability to repay requirements under
§ 226.35(b)(1) and the restrictions on
prepayment penalties under
§ 226.35(b)(2), would continue to be
based on the 1.5 percentage point
threshold.

Thank you, sir. You are a font of information <hope I spelled that right>.