Thread Options
#2037984 - 09/10/15 09:40 PM Prepayment Penalty - bona fide third-party charges
Ninkasi Narcosis Offline
New Poster
Joined: Jul 2014
Posts: 11
Greetings!

We are going through and finalizing all of our forms and procedures for TRID and I'm stuck on one - the definition of a pre-payment penalty.

The ATR-QM guide from CFPB says that the definition of pre-payment penalty does not include certain bona fide third-party charges that are waived at consummation. That's exactly what I have on our equity products. We call them Recapture Fees and will only charge them in the event that the borrower pays off the loan in less than 24 months.

Now for TRID - the LE and CD - would that be considered a pre-payment penalty? My LOS allows me to say that certain product have a pre-payment penalty, and then allows me to code that only fees paid by the lender are included, and for 24 months. This information does print on the LE and CD, but I wonder if it needs to be there or not.

Thanks.

Return to Top
TRID - TILA/RESPA Integrated Disclosures Rule
#2038073 - 09/11/15 03:33 PM Re: Prepayment Penalty - bona fide third-party charges Ninkasi Narcosis
Here4Life Offline
100 Club
Joined: Feb 2010
Posts: 116
No, as far as I know, the definition of pre-payment penalty has not changed.

Return to Top
#2038099 - 09/11/15 04:44 PM Re: Prepayment Penalty - bona fide third-party charges Ninkasi Narcosis
Ninkasi Narcosis Offline
New Poster
Joined: Jul 2014
Posts: 11
I didn't think it did, but just wanted to be sure because not all regulations speak the same language and use the same definitions.

While QM-ATR says our recapture fees aren't a pre-payment penalty, I'm not certain if they are for the TRID CD and LEs, especially since our LOS gives us that option.

Yay.

Return to Top
#2038100 - 09/11/15 04:50 PM Re: Prepayment Penalty - bona fide third-party charges Ninkasi Narcosis
Ninkasi Narcosis Offline
New Poster
Joined: Jul 2014
Posts: 11
Nevermind - found a citation on CFPB's Guide to the LE and CD:

Prepayment Penalty . . . does not include a waived third-party charge that the credit imposes if the consumer prepays . . .

So good.

Return to Top
#2038130 - 09/11/15 06:53 PM Re: Prepayment Penalty - bona fide third-party charges Ninkasi Narcosis
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,593
Cape Cod
See also 1026.37(b)(4) and its Commentary.

https://www.bankersonline.com/regulations/12-1026-037#37b
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top