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#2203728 - 01/23/19 07:02 PM Discount Point or Loan Level Price Adjustment
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The borrower wants to do cash out refinance therefore the investor will charge us a "hit" to the backend pricing (0.625%). The borrower can either have a higher interest rate or pay this "hit" that we incur to keep a lower rate. Is this a discount point or loan level price adjustment?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2203737 - 01/23/19 07:23 PM Re: Discount Point or Loan Level Price Adjustment BA13
rlcarey Online
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rlcarey
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Galveston, TX
Not sure whether or not you are being charge a hit on the secondary market has to do with your offer to the applicant.

If you say to the consumer that you can have the loan at 5% or you can have the loan at 4.75% and pay a point, then you have points.

The secondary market transaction is neither here nor there as far as the consumer is concerned.
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#2203743 - 01/23/19 07:49 PM Re: Discount Point or Loan Level Price Adjustment BA13
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I agree with what you are saying. I'm not sure it was explained to the borrower by using the words "paying points" but from what I've gathered so far, the lender charged the fee because of the cash out loan purpose but also stated the borrower would have had a higher rate if the 0.625 wasn't assessed.

To make sure I'm understanding the difference and relay the information to the lending staff, because this scenario involved a rate option for the borrower and the borrower paid a fee to have a lower rate, it's a discount point. Had we charged a fee because the borrower had a lower credit score or higher loan to value (anything not rate related), it would be a loan level price adjustment on the TRID disclosure?

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#2203749 - 01/23/19 08:07 PM Re: Discount Point or Loan Level Price Adjustment BA13
rlcarey Online
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Galveston, TX
You don't have a pricing sheet from which you allow a customer to choose from if they don't want your par interest rate that you are offering?
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#2203763 - 01/23/19 09:27 PM Re: Discount Point or Loan Level Price Adjustment BA13
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We don't have a pricing sheet. The lender check the investor rates and tell the borrower what the rate will be. When the lender put that data in to compute a rate, the cash out refinance purpose triggered a fee to the FI. The lender told the borrower you can have the rate of 5.00 or you can pay 0.625% to have a rate of 4.75. That 0.625 was the percentage the investor charged the us because it was a cash out refi. The borrower chose to pay the fee and obtain the 4.75 rate.

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#2203777 - 01/23/19 10:21 PM Re: Discount Point or Loan Level Price Adjustment BA13
rlcarey Online
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Then it sounds like a point to me. The borrower was given the option and paid to reduce the rate.
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#2203781 - 01/23/19 10:37 PM Re: Discount Point or Loan Level Price Adjustment BA13
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Thanks Randy, I appreciate the information and your time!

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#2204152 - 01/28/19 05:58 PM Re: Discount Point or Loan Level Price Adjustment BA13
mac444 Offline
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But if the loan level pricing adjustment (LLPA) is being charged to the borrower and not added to the rate the amount would be itemized separately in section A so then it would not be considered as (Points)?

37(f)(1)-5. Itemization. Creditors determine the level of itemization of “Origination Charges” that is appropriate under § 1026.37(f)(1) in relation to charges paid by the consumer to the creditor, subject to the limitations in § 1026.37(f)(1)(ii). For example, the following charges should be itemized separately: compensation paid directly by a consumer to a loan originator that is not also the creditor; or a charge imposed to pay for a loan level pricing adjustment assessed on the creditor, which the creditor passes onto the consumer as a charge at consummation and not as an adjustment to the interest rate.

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#2204193 - 01/28/19 08:58 PM Re: Discount Point or Loan Level Price Adjustment BA13
rlcarey Online
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Hence my questions and since the borrower actually had a choice of rates for the charge, then it is not "which the creditor passes onto the consumer as a charge at consummation and not as an adjustment to the interest rate."
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#2204280 - 01/29/19 05:22 PM Re: Discount Point or Loan Level Price Adjustment BA13
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Also, be careful about excluding amounts as "bona fide" discount points. Generally, the expectation for this is that a .25% reduction in rate is equivalent to 1 point paid.

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