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#1534678 - 04/12/11 09:08 PM Renewing Balloon - HPML issue?
Hi Offline
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Joined: Jun 2003
Posts: 54
We have a loan that was originated prior to October 1, 2009. The loan has just now ballooned and we are looking at extending and modifying the loan. We do not obtain a new application, we do run an updated credit report, and we do not prepare a new note. Do we have to worry about HPML rules since the initial application was received prior to October 1, 2009?

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#1534700 - 04/12/11 09:35 PM Re: Renewing Balloon - HPML issue? Hi
raitchjay Offline
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Joined: Oct 2009
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OK
HPML rules do not currently apply to modifications/extensions. (I think i remember something in the works that DFA is trying to change that in the future.) As long as you aren't only modifying and extending loans that would be HPMLs (and refinancing others) i wouldn't think you'd have an issue.
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#1547692 - 05/06/11 07:45 PM Re: Renewing Balloon - HPML issue? raitchjay
SouthoftheBorder Offline
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Joined: Feb 2002
Posts: 335
The South
News Flash!
I just got off the phone with FDIC (ATL)and was told that a maturing balloon is considered a new origination and subject to HPML. We do not do a lot of residential mortgages but have some where a customer could not get a loan based on the 2ndary Mkt standards and we did balloon notes for them....we HELPED the borrower ... we just had one that matured with an old rate of 8.50% and we just wanted to renew it at the same rate. I was told that we can keep that rate but the loan becomes an HPML and we have to set up escrow and do a really good job verifing income and ability to support housing debt and overall debt. Does anyone have any thoughts on this?

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#1547707 - 05/06/11 07:57 PM Re: Renewing Balloon - HPML issue? SouthoftheBorder
raitchjay Offline
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Joined: Oct 2009
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OK
Reg. Z is the Fed's baby (at least for awhile longer). I don't understand where the FDIC's authority to make such a statement would come from. Did this part of the DFA kick in already and i missed it?
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#1547954 - 05/09/11 01:13 PM Re: Renewing Balloon - HPML issue? raitchjay
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,645
Bloomington, IN
Quote:
we just had one that matured with an old rate of 8.50% and we just wanted to renew it at the same rate


How do you renew a legal agreement that expired? Any new agreement, even with the same terms, would satisfy and replace the expired agreement.

You will see from my past posts that I would agree with the FDIC that any renewal of a matured note would constitute a refinancing.

However, it the note is modified before the maturity then I will defend the modification does not constitute a refinancing as long as the modification does not inadvertently become a refinancing under 226.20 and its Commentary.
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#1548182 - 05/09/11 04:24 PM Re: Renewing Balloon - HPML issue? Dan Persfull
Allformyfamily Offline
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Allformyfamily
Joined: Jun 2010
Posts: 150
I agree with Dan. All of our mortgage loans are set-up as balloon loans. According to your wording (and assuming you explained it the same way to the FDIC), your loan has already matured (ballooned). Anything you do now will constitute a new loan. Modifications must be done prior to the maturity (balloon).

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#1549117 - 05/10/11 07:45 PM Re: Renewing Balloon - HPML issue? Allformyfamily
SouthoftheBorder Offline
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Joined: Feb 2002
Posts: 335
The South
Thanks for the responses - of course our Sr Lender says its a renewal not a new origination regardless of the maturity date AND I agree with all of you & have always had this fight at the banks where I've worked before - but I was thinking - if our balloon note was going to mature at the end of the month could we 'renew'/'modify' it by the 20th, extend the maturity date and not have it considered a new orgination?

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#1549838 - 05/11/11 11:36 PM Re: Renewing Balloon - HPML issue? SouthoftheBorder
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 78,648
Galveston, TX
"of course our Sr Lender says its a renewal not a new origination regardless of the maturity date"

I would suggest that your Sr. Lender not play attorney (even if he did sleep at a Holiday Inn Express recently) and see if your bank legal counsel agrees.
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