O.K. I'm thrown for a loop here. One of my peers said that he was recently reading some Kirchman guidance relating to HOEPA. He says that the way he reads it, the sum total of monthly PMI premiums from the time the loan is made until the PMI cancels (when the loan gets to 80% LTV) should be added to the fee calculation when determining if a loan is subject to HOEPA disclosures. I know that 226.4(b) lists credit guarantee insurance premiums, but I'm not sure that includes PMI. I also know that section 32 states that you only include premiums for CL&D or other loss of income insurance if they are paid at or before closing. PMI isn't really loss of income insurance, so I'm wondering if anyone else is including PMI in their HOEPA fee calculation?

PS- If this discussion has already occured, please point me to the link. Thanks!

PMI is a finance charge (for as long as you require it). Therefore, it must be included in the HOEPA fees test per §226.32(b)(1)(i).

If the loan that requires the PMI meets the definition in Reg. Z of a "residential mortgage transaction", HOEPA does not apply to it. Here is a link that takes you to the coverage provisions for HOEPA. There is an exclusion for residential mortgage transactions. See section 226.32(a)(2)(i).

http://www.bankersonline.com/regs/226/226-32.html

Anon is correct. A refinance would be covered by the requirements of HOEPA and could have PMI.

Thanks for the clarification. I was thinking of the refi's that might have PMI as being problematic, if we did in fact need to be adding PMI premiums to our calculation.

This question is for my clarification. Wouldn't the PMI premiums already be calculated in the finance charge and the amount you include in the "fees" test be the amount collected at closing?

Dan asked:
Wouldn't the PMI premiums already be calculated in the finance charge
Yes.

and the amount you include in the "fees" test be the amount collected at closing?
Yes.

The Fees Test looks at all Finance Charges, except interest, so I was simply pointing out that you do need to include all PMI in the HOEPA Fees Test.

I attended a seminar put on by our state bankers association a few days ago. The consensus of the group was that only a prepaid portion of PMI would be included in the fees test. This seems logical, but I keep going back to the language in the reg "All items required to be disclosed as finance charges under Reg Z Sections 226.4(a) and 226.4(b), except interest...". Isn't the total of anticipated monthly PMI premiums disclosed as a finance charge?

Rick, I think you're overlooking this part if the total points and fees payable by the consumer at or before loan consummation .

Thanks Dan. I guess they couldn't have made it simple enough by saying "prepaid finance charges", because they wanted to include CL&D and other items that can be excluded from finance charge under certain conditions.