[pcorder]

Good morning, and please help!

Could you explain (to my feeble brain) how to accurately calculate the total finance charge and APR when a “total premium” of a monthly borrower paid PMI payment is not listed on the Closing Disclosure? I cannot find guidance anywhere. The sample Closing Disclosure published by the CFPB for a fixed rate loan, has a Mortgage Insurance payment listed on page 1, but does not have a figure listed anywhere on page 2.

For a small percentage of our loans sold to FNMA, PMI was required due to the loan to value. The borrower pays a monthly payment, until the ltv reaches 78%. The monthly payment is being disclosed on page 1 of the CD. However, the total PMI premium seems to be showing up in the total finance charge on page 5, and respectively, the APR. When we run the loan through APRWIN to verify the FC and APR, we are getting an overstated FC/APR because we are not including a total PMI premium…only the breakdown of closing costs listed on page 2. When we calculate the monthly PMI payment and multiply it by the number of payments on the amortization schedule until ltv drops below 78%, poof – there’s our overstated FC! I know overstating isn’t considered a reimbursable violation, but could that come back to haunt us when the FRB exam team runs a few through APRWIN and gets the same thing? Gah! I just want to know how to complete the puzzle, but I can’t find all the pieces. 🙁

Has anybody else run into this?

Thanks so much!

Oh yeah, and CONGRATS on the addition of McKinley Rose to your wonderful family! She is a precious gift from above. <3

[jholzknecht]

PMI is a finance charge. When it is paid at or before closing it is a prepaid finance charge. When it is paid monthly it is a regular finance charge. In any event the amount of the PMI premiums should be included in the finance charge.

When you enter the monthly payments into the APRWIN do you include the PMI premiums in the payment? If not, run the transaction through APRWIN again with the PMI amount added to the principal and interest and see if that results in an answer more to your liking.

[rcooper]

There are three places that PMI could be disclosed on page 2 of the CD – Service You Cannot Shop For (see comment 1026.37(f)(2)1-2); Prepaids (Comment 1026.37(g)(2)) or Escrow (Comment 1026.38(g)(2). It seems you are not seeing the PMI listed on page 2 because it will be part of the mortgage payment (as shown on page one) rather than fitting into one of the three criteria on page 2 (at consummation, prepaid for future premiums, or part of escrow).

[pcorder]

Jack! You are a genius…oh my goodness, I get it now! I ran it through and it’s perfect! Just have to remember to put in 2 payment streams.

Thanks so much! Thanks to you too, Robin! Y’all have a great week!

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