Fair Lending Issues?

Posted By: mnbanker09

Fair Lending Issues? - 07/14/21 08:49 PM

I feel that we have some fair lending concerns when a lender can offer a consumer mortgage loan and choose between either of the below (hypothethical) scenarios, based on customer's 'comfort level'. Is this common to structure pricing in this way--lower rate w/higher origination fee; higher rate with lower fee?

1) Rate @ 2.25%, Origination Fee: 1%
2) Rate @ 3.00%, Origination Fee: .25%

How would the consumer know the true price of the loan without providing an LE for both scenarios? TIA.
Posted By: InFairness, CRCM

Re: Fair Lending Issues? - 07/14/21 09:09 PM

How would you know that the customer actually made the decision?
Posted By: mnbanker09

Re: Fair Lending Issues? - 07/14/21 09:17 PM

Agree.
Posted By: rlcarey

Re: Fair Lending Issues? - 07/14/21 10:24 PM

Well, would not not be delivering the anti-steering disclosure under 1026.36(e) if you were making such an offer?
Posted By: Rocky P

Re: Fair Lending Issues? - 07/15/21 12:55 PM

If I'm understanding the question right.
There have always been customer options for buying down the loan rate, based on circumstances. Elderly have had a chance to accumulate savings, but may be at the waning years of their work life, and would use a higher origination fee to have lower permanent payments. Younger generation does not have the additional funds to put down, but are at the low end of their earnings. They could afford the larger payments.

Most lenders have the buydown as part of the pricing sheet and MLO's usually discuss with the borrower based on the available cash they have to put down. There should be minimal issues as long as the Orig. fee and buydown rate are validated and accurate, (e.g. 1 point = 1/4% lower rate) and the option is given to all.