HOEPA - Help Me! Help Me!

The worksheet that is posted is great. I just need a little tutoring. Should be fees be listed on the worksheet, regardless of financed or not financed. Also I'm having a hard time understanding "loan amount" under HOEAP. Do I start with the amount financed and then subtract any of these fees that are not finance charges. I apprciated any guidance. But please speak slowly and use only very short words.

O...K...I... Will..try...to...help. (just kidding). Technically, there is a difference between financed fees and fees paid in cash (this is very technical). In fact, I didn't even catch this until fellow BOL poster, David Chaney called me. He noticed that our worksheet doesn't break these out.

Regulation Z Commentary 226.32(a)(1)(ii) states "Total Loan Amount. For purposes of the "points and fees" test, the total loan amount is calculated by taking the amount financed, as determined according to section 226.18(b), and deducting any cost listed in section 226.32(b)(iii) and section 226.32(b)(1)(iv) that is both included as points and fees under section
226.32(b)(1) and financed by the creditor."

Our spreadsheet deducts all fees, whether paid in cash or financed, from the principal loan amount or the face amount of the loan, instead of deducting 226.4(c)(7) items and credit insurance fees that are paid to and financed by the bank from the amount financed. [whew! that may have a bit technical].

What this does is over distort the percent as the numerator is smaller than it needs to be. For those of you that have downloaded the HOEPA Spreadsheet, I will try to work on this, but I may just leave it with a slightly conservative answer.

So, back to the question: The HOEPA "total loan amount" is really the principal amount of the loan less any financed HOEPA fees (finance charges + non-finance charges the bank or an affiliate keeps).

David,
I see your worksheet has a spot for PMI for the initial deposit. Don't we have to include all of the PMI that is paid in this calculation? Right now my bank does not allow PMI on refinances so this does not affect me. If there are banks that allow it, then they'll need to modify the worksheet to factor in all of the PMI premiums to be paid. The only finance charges that are excluded from the HOEPA total points and fees calculation are the odd day's interest and the interest to be paid over the life of the loan. Am I correct?

It is my understanding that only the amount due up front (at closing) is needed in the HOEPA fees test. I'm at home (sick ) today and don't have my regulations to look this up. Can someone support (or deny) this for me. Thanks.

The regulation does not state you have to include future payments in the calculation. 226.32(a)(1)(ii) The total points and fees payable by the consumer at or before closing will exceed the greater of 8 percent of the total loan amount....


Dave, are you sick because of the football games Saturday? I'll send you some "Sooner Magic" to soothe your stomach.

You are right. The rule refers to points and fees payable by the consumer at or before closing. I missed that. I hope you feel better soon. Thanks for your help.

When going to the Treasury site to pull the rates....which category do we pull from.....Treasury Constant Maturites or Treasury Long Term average.....??? Thanks for the worksheet on HOEPA...this will help us tremoundously.....

Treasury Constant Maturites 11. Also, you use the daily rate and not the weekly average. If the 15th falls on a weekend or holiday, used the first business day preceding the 15th.

As I read section 32 (a)(1)(ii)if our origination fee is $600 then it exceeds the 2002 amount of $480 so as a result any refinance that we charge our origination fee would be a Hoepa loan. Is this correct? I just want another opinion of my interpretation.

§226.32 Requirements for certain closed-end home mortgages.
It is ...the greater of 8 percent of the total loan amount, or $480.

Does the $600 exceed 8% of the loan amount? This is a two-prong test. The test is if total points and fees will exceed the GREATER of 8% of the loan amount OR $480. If $600 represents _<8%, you do not have a HOEPA loan.