My bank processes secondary market mortgage applications and is paid a broker fee by the investor when the loan closes. The customer does not pay any mortgage broker fees whatsoever. Where does the fee paid to us by the purchasing investor have to be disclosed, knowing that it does not come out of the customer's pocket? (GFE?, HUD-1?, TIL Dislosure as PPFC?)

Also, does this fee need to be included in the points and fees calculation for HOEPA if the customer does not pay it?

Any help is appreciated.

The fee should be shown on the GFE and HUD-1 as a POC charge. The fee is not a PPFC for TIL purposes, nor does it need to be included in the points and fees calculation for HOEPA, since the borrower is not paying the fee.

Lee gave a great answer. While HOEPA was addressed, you may also want to check your state predatory or high cost lending laws. Certain states indicate that all broker compensation whether paid directly or indirectly by the borrower are included in high cost calculations. Yield spread premiums for example have to be included in calculations when that type of wording applies.

It sounds like your fees may fit into that category, at least in some states.

Thanks for your answers. The fees we receive are actually the premiums that the secondary market purchaser is paying us on the loan. Of course, we do not receive any fee if the loan never closes. I referred to the fee as a broker fee but are the premiums we're receiving actually considered yield spread premiums? I'm a little confused about the definitions of each.

Are you selling the loans to the investor in a table funding transaction? Or, are they purchasing the loans after the loan closes. That's a critical distinction as to whether disclosures are required.

Generally, everything happens at the closing, including the "sale" of the loan to the investor. We've always referred to these transactions as secondary market loans, but based on the definitions provided in RESPA, I guess they are table funded. Now I'm really getting confused. I do know that our agreement with the "investor" refers to the bank as the "broker" and the investor as the "lender". I also know that we always provide GFE's, HUD-1s etc.

Can you give me further direction, and let me know what difference it makes when it comes to disclosing the premium we receive from the investor when the loan is sold.

I appreciate your help!!

If you sell the loan to an investor in a table funding transaction, then any compensation between you and the funding lender is covered by RESPA and has to be shown POC on both the good faith estimate and the HUD-1.

I don't know that it matters that much what the fee is called as long as it is clear what it is. I believe yield spread premiums are generally what is paid in these types of transactions.