[gleonard]

Jack,

In regard to the discussion topic Friday about charging points to buy the rate down, we have a question. Frequently, we make construction loans to customers who have already gone to a mortgage company to get pre-approved for the permanent phase of a construction loan.

Since we will not be making the perm loan, we charge the customer 1 point on the construction loan for obvious reasons. Additonally, we have an origination fee since under revised RESPA,we have to include some fees in the origination fee.

These loans have the same rate as othe construction loans where the bank is going to do the construction and perm phase of the loan, therefore the point we charge on these construction loas does not buy the rate down.

Do you see this being a problem since the point the borrower is paying does not buy the rate down on these loans?

[jholzknecht]

The problems occur when you charge a discount point, but do not lower the rate. It appears that your bank charges an origination point, rather than a discount point, so no rate adjustment is needed.

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