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#1900544 - 02/27/14 02:51 PM Simultaneous loan HELOC calc -interest rate to use
YaYa Offline
Junior Member
Joined: May 2008
Posts: 48
Ohio
I have a question regarding the rule that was effective in January for simultaneous loans (specifically HELOC) in regard to payment calculation.


Commentary 43(c)(6) states:

3. Payment calculation—home equity line of credit. For a simultaneous loan that is a home equity line of credit subject to § 1026.40, the creditor must consider the periodic payment required under the terms of the plan when assessing the consumer's ability to repay the covered transaction secured by the same dwelling as the simultaneous loan. Under § 1026.43(c)(6)(ii), a creditor must determine the periodic payment required under the terms of the plan by considering the actual amount of credit to be drawn by the consumer at consummation of the covered transaction. The amount to be drawn is the amount requested by the consumer; when the amount requested will be disbursed, or actual receipt of funds, is not determinative. Any additional draw against the line of credit that the creditor of the covered transaction does not know or have reason to know about before or during underwriting need not be considered in relation to ability to repay. For example, where the creditor's policies and procedures require the source of down payment to be verified, and the creditor verifies that a simultaneous loan that is a HELOC will provide the source of down payment for the first-lien covered transaction, the creditor must consider the periodic payment on the HELOC by assuming the amount drawn is at least the down payment amount. In general, a creditor should determine the periodic payment based on guidance in the commentary to § 1026.40(d)(5) (discussing payment terms).

Our HELOCs are interest only payments therefore the payment calculation in regard to a simultaneous loan would be the interest payment for the amount drawn by the consumer at consummation of the covered transaction.

Currently, the HELOC rate is 3.25% but our note has a ceiling rate of 25%.

The Commentary does not clarify if the interest rate to be applied to the simultaneous payment calculation (HELOC) would be the current interest rate or the ceiling amount specified within the note.

Can you clarify which should be used (current rate or ceiling rate)?

Thank you!

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Ability to Repay/Qualified Mortgage Rule
#1900734 - 02/27/14 06:57 PM Re: Simultaneous loan HELOC calc -interest rate to use YaYa
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1800956

Use the contract rate (index plus margin), not the ceiling rate.
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#1900888 - 02/27/14 09:11 PM Re: Simultaneous loan HELOC calc -interest rate to use YaYa
YaYa Offline
Junior Member
Joined: May 2008
Posts: 48
Ohio
Thank you for your response & the link Dani, but after reading the link, I am wondering if we are talking about two different situations.

It appears the link is referring to calculations for high cost. Is this correct?

My situation is actually calcuating the ATR for a mortgage loan that will have a HELOC close simultaneously. I am not sure what rate should be used for the HELOC in this situation.

The HELOC is interest only payments. According to the commentary, should be calculated for the draw amount only. But it does not specify the rate to use in this situation.

Was your scenerio the same?

Thanks so much! Need to make a decision quick..........

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#1900994 - 02/28/14 01:23 PM Re: Simultaneous loan HELOC calc -interest rate to use YaYa
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
I'm not sure what the controversy is. No where in the regulation does it talk about any rate other than the one currently applicable:

1026.43(c)(6) Payment calculation for simultaneous loans. For purposes of making the evaluation required under paragraph (c)(2)(iv) of this section, a creditor must consider, taking into account any mortgage-related obligations, a consumer's payment on a simultaneous loan that is:

(ii) A home equity line of credit subject to § 1026.40, by using the periodic payment required under the terms of the plan and the amount of credit to be drawn at or before consummation of the covered transaction.
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