Questions from the 1/10/14 CMG Meeting

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    We received more questions than we had time to answer in our last CMG meeting. Here are the questions and the answers:
    • In the past, we charged a 1 % origination fee. How does this compare to “discount points” that is excluded from points and fees?
    Answer: Points can be either origination points or discount points. Discount points are used to buy down the interest rate. One point should result in a 25 basis point reduction in the interest rate.
    • Lender Paid Mortgage Insurance – will this amount be counted in the PTs & Fees. The upfront MI will be for Private Mortgage Insurance. The cost of the MI that lender is paying is really coming from premium pricing so in essence the fee has been built into the rate. For APR purposes it’s built in so no need to add as a Finance charge. The question is whether or not it is counted in Pts & Fee Calculation. Fee will be refundable. I’d appreciate your opinion.
    Answer: Anything included in the interest rate is included in the finance charge as interest. The calculation of the total points and fees includes the total finance charge but allows you to exclude interest, so in your case the charge is not included in the points and fees.
    • Would it be possible for you to do some actual examples of how to use the Points and Fees Calculator and send to the group so we have a better understanding of the calculations and can also utilize to incorporate into our internal procedures?
    Answer: We will provide some examples, as time allows. We are getting bombarded with questions (by e-mail, phone and from the Forum) from bankers in the middle of implementing the rules.
    • Are 1-4 family rental properties excluded or covered by the ATR rules?
    Answer: The ATR rules apply to consumer credit transactions secured by a dwelling. If your rental property loans are for a consumer credit purpose they are covered by the ATR rules.
    • Can we discuss the definition of “total loan amount” for HOEPA purposes for closed end transactions?
    Answer: The total loan amount for an open-end credit plan is the credit limit for the plan when the account is opened.

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