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#2081657 - 06/03/16 01:39 PM MLA - calculation of MAPR & ancillary add-on produ
complygirl Offline
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Posts: 822
midwest
Have a couple of questions regarding MLA.

First, will most banks be relying on their software providers to calculate MAPR? A lender asked me if I was aware of any approved MAPR calculation websites (not sure there is a thing)?

Second, as far as the definition of ancillary add-on products goes, would GAP premiums and the cost of warranties be included? Our thoughts are VSI and GAP would be included in the calculation and warranty and filing fees would not be included. How are other banks looking at these fees? I believe at the present time the only guidance on this is that MAPR is stated to cover all interest and fees associated with the loan and two examples have been provided: credit default insurance and debt suspension plans. I don't believe "ancillary add-on products" has specifically been defined. Has there been any additional guidance on this yet? Thanks.

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#2081902 - 06/05/16 07:33 PM Re: MLA - calculation of MAPR & ancillary add-on produ complygirl
Andy_Z Offline
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Software should be built in for this. If it's not, it's a real step backward, having to enter things multiple times, increasing the chance for error and then having to denote on your system somehow that MLA applies. This would be a poor software product in my mind. The reality is, it should already be there.

I'd say a warranty, as I understand it, is included in the MAPR, because:
232.4(c) - Any fee for a credit-related ancillary product sold in connection with the credit transaction for closed-end credit

The exceptions are few and examples are unavoidable taxes and filing fees.

Perhaps there will be guidance from the DoD on this in July, but I haven't seen much of a discrepancy here as to what is in and out. Many banks call the MAPR an "all-in" APR as a rule of thumb.

A warranty plan, as I think of them, is usually associated with a purchase, which when the item is your collateral is not a covered product, yes?
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#2082562 - 06/09/16 12:20 AM Re: MLA - calculation of MAPR & ancillary add-on produ complygirl
James Hill Offline
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Joined: Aug 2011
Posts: 55
Spokane, WA
We are going to treat GAP as a finance charge because it is mentioned as such in the commentary to 1026.4(b)(10).

I agree with Andy when he says that it won't usually be an issue, since warranties will usually be associated with purchases, but they are available on refinances, so I think it is worth discussing. We are NOT going to treat an auto warranty as a finance charge because the cost would be the same in a cash transaction, and there isn't anything in MLA that indicates that a warranty is "credit-related".

Additionally, in the Federal Register, the DOD outlined its thinking on other credit-related products by saying, "As stated when issuing the existing rule, the Department remains concerned that covered borrowers are sold credit insurance products ‘without having these credit insurance products placed in the context of the Service member’s employment status or his or her current level of insurance coverage.’ " - page 43582. See https://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17480.pdf

That statement seems to indicate that they are thinking that service members already have insurance that would meet their needs related to the extension of credit, and implicitly, NOT a service warranty.

I'm interested to hear other opinions.

Best,
James
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James Hill, CUCE, CRCM

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#2092866 - 08/11/16 10:41 PM Re: MLA - calculation of MAPR & ancillary add-on produ James Hill
river girl Offline
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Joined: Nov 2004
Posts: 1,005
We allow the ancillary products such as Gap, MMP, and debt protection to be added after the loan funds.

Am I understanding for closed end loans, this would not need to be recalculated at that time since MAPR only applies at time of consummation.

For open end, I would have to calculate each billing cycle.

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