LPMI question

I think I know the answer to this, and I apologize if it has already been asked and answered. I did do a search!

We are getting ready to roll out an LPMI product. The cost is rolled into the rate as usual. My secondary market department is wondering what do we do if there is an excess credit? For example: If in order to cover the LPMI fee of 2.25%, we have to quote a rate with a premium pricing of 2.50%, what happens to the excess .25%? Does it go to the borrower, or can the bank keep it?

I find it hard to believe that the bank would be able to keep it, but that's what my lenders want! I don't really know a lot about LPMI, so forgive me for the maybe stupid question!

Thanks in advance.

This is a bit of a risk-based decision. My understanding is that you are not required to give the overage to the borrower unless you’ve disclosed it that way. That being said, if you have overages that occur as part of this program, you’ll want to have controls in place to keep the branch from getting greedy. Without sufficient controls, you could end up with a disperate treatment problem.

Thanks jbs, I appreciate the help!