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#1445866 - 09/21/10 03:45 PM
Risk-Based Pricing and Loan Modifications
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Member
Joined: Jan 2009
Posts: 69
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My gut reaction is that loan modifications would not fall under the risk-based pricing notice...Any thoughts on this? I am trying to articulate on paper why it would not apply to loan mods...
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#1446343 - 09/22/10 12:14 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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#1446344 - 09/22/10 12:14 PM
Re: Risk-Based Pricing and Loan Modifications
rockchalk02
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You can find this in the federal register published on January 15, 2010 (75 FR 2752)
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#1446947 - 09/22/10 08:35 PM
Re: Risk-Based Pricing and Loan Modifications
rockchalk02
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Joined: Nov 2007
Posts: 49
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Kristin09....I was under the same impression, but am beginning to second guess those thoughts. I think it may apply and would be interested in other's thoughts.
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#1446954 - 09/22/10 08:45 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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Joined: Apr 2001
Posts: 2,245
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Section 222.75 of the regulations says: "A consumer is entitled to no more than one risk-based pricing notice under §222.72(a) or (c), or one notice under §222.74(d), (e), or (f), for each grant, extension, or other provision of credit. Notwithstanding the foregoing, even if a consumer has previously received a risk-based pricing notice in connection with a grant, extension, or other provision of credit, another risk-based pricing notice is required if the conditions set forth in §222.72(d) have been met." 222.75 The exception in 222.72(d) is for an account review situation where the lender uses a consumer report to increase the APR on an existing loan.
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#1447656 - 09/23/10 07:33 PM
Re: Risk-Based Pricing and Loan Modifications
Ted Dreyer
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Joined: Jan 2009
Posts: 69
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Section 222.75 of the regulations says: "A consumer is entitled to no more than one risk-based pricing notice under §222.72(a) or (c), or one notice under §222.74(d), (e), or (f), for each grant, extension, or other provision of credit. Notwithstanding the foregoing, even if a consumer has previously received a risk-based pricing notice in connection with a grant, extension, or other provision of credit, another risk-based pricing notice is required if the conditions set forth in §222.72(d) have been met." Thanks for the excerpt Ted. I think you found what I was looking for...if we increase the APR and use a consumer report with regards to a modification, then we would have to provide a risk-based pricing notice. If there is no incerase in the APR with regards to the loan mod or the consumer report was NOT the driving force in the increase of the APR, a risk-based pricing notice would not be required. Do you agree? 222.75 The exception in 222.72(d) is for an account review situation where the lender uses a consumer report to increase the APR on an existing loan.
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#1447748 - 09/23/10 08:49 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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Joined: Apr 2001
Posts: 2,245
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Thanks for the excerpt Ted. I think you found what I was looking for...if we increase the APR and use a consumer report with regards to a modification, then we would have to provide a risk-based pricing notice. If there is no incerase in the APR with regards to the loan mod or the consumer report was NOT the driving force in the increase of the APR, a risk-based pricing notice would not be required.
Do you agree?
Almost, except for the "driving force" language. If you have an APR increase that is based even "in part" on a consumer report, the requirement applies. So, I would be very hesitant to rely on that unless you can show that the consumer report played NO part in the APR increase.
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#1449300 - 09/28/10 06:38 PM
Re: Risk-Based Pricing and Loan Modifications
Ted Dreyer
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#1494511 - 01/13/11 03:45 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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Member
Joined: Apr 2008
Posts: 60
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If we are only required to provide notice one time on an extension of credit, what would happen if the credit was originated in 2010, it has matured and we are renewing the credit for another 12 months...when we do this renewal 9after 1/1/2011, would a notice be required since we did not ever give them one in 2010 when notices weren't required??? Make sense?
Thank you!!
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#1494529 - 01/13/11 04:01 PM
Re: Risk-Based Pricing and Loan Modifications
peerue1
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Joined: Oct 2009
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OK
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I would think only if you are increasing the APR based off of information in a credit report.
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#1494532 - 01/13/11 04:03 PM
Re: Risk-Based Pricing and Loan Modifications
raitchjay
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Joined: Apr 2008
Posts: 60
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So even though we have never given them a notice (credit originated in 2010), and we are only extending the maturity date now, no notice needs to be provided......
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#1494539 - 01/13/11 04:07 PM
Re: Risk-Based Pricing and Loan Modifications
peerue1
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Posts: 9,104
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I would say that is correct. I see nothing grandfathering in account reviews of accounts originated prior to the RBPN rules.
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#1495146 - 01/14/11 03:11 AM
Re: Risk-Based Pricing and Loan Modifications
Sheldon Hendrix
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Posts: 83,363
Galveston, TX
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A loan review for RPBN purposes does not involve a workout or a modification. A loan review for RPBN purposes is when there is a contingency in a credit contract that says if your credit deterioates, we can raise your APR. This is normally associated with lines of credit or credit cards. I have never seen such a contingency in a closed-end credit.
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#2154738 - 11/24/17 07:38 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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Joined: May 2015
Posts: 127
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Can I bring this thread back for review?
(We utilize the exception notice)
If at renewal/modification of a balloon mortgage, does an exception notice need to be provided if we reviewed credit AND increased their rate?
Secondly, if we utilize risk based pricing at origination, we are required to utilize a similar risk based pricing model for renewals as well?
What if rates have generally decreased since origination. The maturing loan was originated at 5%. Cur CURRENT rate offering for new credit (Tier 1) is 4.5%. MUST we give this Tier 1 borrower the same CURRENT rate of 4.5%? Or could we simply hold the rate of 5%, etc....
Thanks!
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#2154775 - 11/27/17 02:06 PM
Re: Risk-Based Pricing and Loan Modifications
kristin09
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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If at renewal/modification of a balloon mortgage, does an exception notice need to be provided if we reviewed credit AND increased their rate?
What if rates have generally decreased since origination. The maturing loan was originated at 5%. Cur CURRENT rate offering for new credit (Tier 1) is 4.5%. MUST we give this Tier 1 borrower the same CURRENT rate of 4.5%? Or could we simply hold the rate of 5%, etc....
Sec. 1022.72 General requirements for risk-based pricing notices.
(a) In general. Except as otherwise provided in this subpart, a person must provide to a consumer a notice (“risk-based pricing noticeâ€) in the form and manner required by this subpart if the person both:
(1) Uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to that consumer that is primarily for personal, family, or household purposes;
Secondly, if we utilize risk based pricing at origination, we are required to utilize a similar risk based pricing model for renewals as well?
No.
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