Do I have a valid change reason?
Our system is set up so that if a loan in NC has a loan amount less than 300K then fees are capped in order to avoid HPML challenges. If a loan amount increase is requested causing a valid reason to change and issue a new LE would I be able to tie an increase to my underwriting and processing fee too?
This question is in reference to the underwriting and processing fee only.

bump

I'm wondering why an increase in a loan amount creates a legitimate increase for those particular fees. Sorry, I'm not a fan of percentage based fees. It costs the same to process/underwrite regardless of an amount. Just my opinion.

More directly, unless the increase is rate-related, I don't believe you have a valid change.

Ditto Joker on all counts.

Thanks, I advised we couldn't increase the fees.
The question was just for this very specific case.
Here is the whole chain of events and #3 was the reason I asked.
1) L/A was $305K and everything was normal(fees were in line with all other loans and all other states that we do business in)
2) L/A was reduced to $298K and the fees had to be reduced to accommodate the HPML warning our system gives us.
3) L/A was increased back to $305K but now we were stuck with the lower fees due to the reduction.

It doesn't happen a lot but it has happened about 3 times this year.

Thanks again.

An HPML warning is just that...a warning. imho, there was no need to redisclose to remove that warning. You can do an HPML loan.
If at the time of doing the CD you want to remove the warning, then lower the costs on the CD.

I don't understand why financial institutions are afraid of HPMLs (every in-house ARM we do is a HPML) and if you reduce your fees to avoid HMPLs then IMO you are not in good faith disclosing your true costs. I don't know what the increase in fees would be but lets say your normal fee is $750 and you cap it at $500 to avoid HMPL status. Are you saying it costs you $250 more to process a loan request for an additional $7,000?

Now with my rant over your fees appear to be tied to the loan amount. IOWs if the loan request is =<$300,000 the fee is X and if the loan request is > $300,000 the fee is Y. If the referenced fees are directly affected by the loan amount then as long as you re-disclose within 3 business days of learning of the change you could issue a revised LE resetting your threshold.

HOWEVER, I will recant that statement if your fees are not set fees. If you have a $250,000 loan and you cap the fees at $2500 instead of $3000 to avoid HPML but you have another $250,000 loan that you have to cap the fees at $2300 instead of $3000 to avoid HPML then your fees are not loan amount related, they are fee related. If you Charge 1% on the 1st $250,000 instead of 1.25% and you charge .75% on the second $250,00 instead of 1.25% to avoid HPML then again your fee is not based on the loan amount. It's based on how much you have to reduce fees to avoid HMPL status.

The key is if the related fee is directly affected by the loan amount, not whether it is affected in order to keep you from having to disclose a HPML.

) L/A was reduced to $298K and the fees had to be reduced to accommodate the HPML warning our system gives us.

Sounds like you issued an informational LE which would not reset your tolerances lower. You never reset your tolerances lower unless they are interest dependent charges based on a written rate lock agreement. Investors may have another take on this matter, but I guess I don't see what the deal is???? Your baseline remains with your initial LE unless there was a changed circumstance. Lowering the loan amount which lowers the fees is not one.

Appreciate all the feedback. Thanks Everyone.

Second what RL said, though some lenders will honor the lower disclosed fees to keep the borrower happy. However, there is not technical rebaseline of tolerances in this scenario.

@RR - I'm not a fan of percentage based fees either, but it seems to be relatively common in the Mtg. Banking industry. I wish the CFPB would come out and more clearly state that lender origination costs as a percentage of the loan amount cannot be used except in the case of discount points.

Our system is set up to adjust downward to the max allowable fees for NC's state fee limitation. It just so happens that each of these become an HPML warning in our LOS.

Remember, there's nothing wrong with doing an HPML loan.
Read this for further guidance from the CFPB.

I agree there's nothing wrong with doing an HPML loan, however, I am at a bank that won't get away from them even when the escrow requirements were removed from us. Having said that, I will give the following piece of advice.

Examiners do not like seeing fees lowered to avoid anything. We ONLY lower our rate [and it's consistent across the board] in 1/8th increments. Playing with fees is a huge fair lending issue, so "buyer beware"!

Justin, even 125 years ago, when I was a mortgage originator, all origination fees were 1% of the loan amount. Then came the addition of ysp's and all heck broke loose with greedy originators keeping that extra for themselves rather than place it where it should have been...as a buyer cost reduction...hence, more regulatory scrutiny.

I said it then and I'll still say it. It costs me the exact same thing tp process from application to closing to handle a $35000 loan as it did a $350,000 loan. Basing that fee on a percentage has never felt right or made any sense to me. The only consolation was that generally, the folks requesting the $35k loan were typically much more enjoyable and much more appreciative than the $350k buyers, so in that regard...I was okay with sticking it to the big buyer. !