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#1897922 - 02/18/14 07:31 PM 3.75% Discount Points-LOS will not exclude 2% BFDP
CMSIngenue Offline
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Joined: Jan 2013
Posts: 154
Currently have a loan in process where their is 3.75% discount points. Rate at par with LLPAs is 4.375%. With 3.75% Discount Points, Rate is reduced to 4%. Our LOS will not exclude any of the discount points even though it is within the APOR limits.

At first it was thought that the borrower was not receiving a sufficient enough reduction in interest rate but our company was informed by the LOS provider that if discount points exceed 2%, none of the discount points will be excluded from the 3% cap. Is anywhere familiar with this? I am unable to find verbiage in the Reg to support this position. Am I completely missing something?

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Ability to Repay/Qualified Mortgage Rule
#1899118 - 02/21/14 09:37 PM Re: 3.75% Discount Points-LOS will not exclude 2% BFDP CMSIngenue
LeslieI Offline
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Joined: Nov 2012
Posts: 7
I would like to know the answer as well. Our vendor has also taken an all or nothing approach, but I thought we could have part of the discount points be bona fide and the excess would not be bona fide.

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#1899394 - 02/24/14 06:56 PM Re: 3.75% Discount Points-LOS will not exclude 2% BFDP CMSIngenue
CMSIngenue Offline
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Joined: Jan 2013
Posts: 154
I spoke to a compliance individual from our LOS Provider. He stated this approach is based on meetings with CFPB officials. They have nothing in writing from the CFPB. Nor do any of our investors take this stance. However, the compliance tool from our LOS is being used to evidence compliance with ATR/QM so we are stuck with this rule.

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#1899421 - 02/24/14 07:30 PM Re: 3.75% Discount Points-LOS will not exclude 2% BFDP CMSIngenue
RR Joker Offline
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Posts: 20,654
The Swamp
Doesn't that fly in the face of their own example?

2. Example. Assume a transaction that is a first-lien, purchase-money home mortgage with a fixed interest rate and a 30-year term. Assume also that the consumer locks in an interest rate of 6 percent on May 1, 2014, that was discounted from a rate of 7 percent because the consumer paid four discount points. Finally, assume that the average prime offer rate as of May 1 , 2014, for home mortgages with a fixed interest rate and a 30-year term is 5 percent. The creditor may exclude one discount point from the points and fees calculation because the rate from which the discounted rate was derived (7 percent) exceeded the average prime offer rate for a comparable transaction as of the date the rate on the transaction was set (5 percent) by only 2 percentage points.
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