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#32918 - 09/16/02 07:36 PM HOEPA again...
Miss Kitty Offline
Platinum Poster
Joined: Mar 2002
Posts: 721
California
I know this may seem repetitious, it is also a pain! So, please forgive any naiveness on my part. In attempts to formalize the new requirements under HOEPA, our Cr. Administrator is inquiring if we can plug in fees etc. based on the highest fees a customer would pay. Or is it acceptable to come up with a standard pricing rate that would demonstrate that we're not exceeding any points and fees, and we would periodically test the rate and fees to make sure we're not exceeding what's allowed.

My reply was that to my knowledge we had to complete a HOEPA Worksheet for every home equity/improvement or refinance loan prior to consummation. Where does it say that we have to check all loans prior to consummation? Am I reading into this revision to deep? Will the light bulb ever turn on? Treading muddy waters uphill without a paddle isn't getting any easier. It's always one more piece of paper...

Thanks for any and all help on this.

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Lending Compliance
#32919 - 09/16/02 07:58 PM Re: HOEPA again...
waldensouth Offline
Power Poster
waldensouth
Joined: Nov 2001
Posts: 7,981
FINALLY ABOVE the gnat line
The reg. doesn't tell you how to comply - it simply states what you are supposed to do and what happens if you don't. If you can create a list of standardized fees that never exceed 8% of any loan amount and APR caps that never exceed the high rate triggers, then go for it. I would think that you have to set those fee amounts based on loan amount - so you could end up with a set of fees for say, under $15,000 and Over $15,000. I haven't done the math and don't know what the cut off would be. The reg is, however, based on each individual loan, so you could not say that "Our program is designed not to make Section 32 loans" and be okay. Each loan in your progam would have to be under the Section 32 thresholds to avoid a violation of the reg. Someone would have to check.
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#32920 - 09/16/02 08:07 PM Re: HOEPA again...
Bartman Offline
Diamond Poster
Bartman
Joined: Oct 2000
Posts: 1,191
Springfield
Cheryle, I think you've outlined the three basic types of controls for HOEPA coverage, all in two paragraphs. It's just a matter of picking the one your shop is most comfortable with, based on your pricing structure and your institution's risk tolerance.

The light switch for me was lots of testing. We know we aren't a HOEPA-applicable lender under the current rules and our present pricing. The thing that flips us into HOEPA territory post-October 1 is the inclusion of credit life & A&H premiums in the fees test. So I tested for that.

I looked at small-dollar, long & short term loans with single & joint life and accident & health. Then I looked at longer term loans with the full package of coverage. I found different cutoff points, and it became clear that financing the credit insurance premiums may cause us to trigger HOEPA disclosures in some cases.

So we're looking to change the credit insurance product to a non-financed premium alternative. If that happens, our HOEPA risk is low and in my case I wouldn't encourage a worksheet for every loan. It's just extra work for a condition we're very confident does not exist.

If your pricing scheme is less clear, it may make sense to institute a worksheet-for-every-loan procedure.
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Opinions are Bartman's, not those of my employer. "A noble spirit embiggens the smallest man."

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#32921 - 09/16/02 08:34 PM Re: HOEPA again...
Miss Kitty Offline
Platinum Poster
Joined: Mar 2002
Posts: 721
California
Louvera & Bart -
Thank you both very much for your response. I would like to add that because of the changes earlier in the year regarding credit life & A&H (disclosure requirements etc.) we chose not to offer this product.

It seems to me that no two loans are exactly alike, so if we did come up with standardized fees, which we basically already know about what the fees will run, how could you avoid not falling into a HOEPA trap? It seem the only way to be 100% sure is to do the worksheet on every loan. I will add that the link David Dickinson provided is wonderful for running the test. Fortunately our volume is not overwhelming, the problem is getting everyone on the same page not to mention understand this already confusing area.

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