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I agree with your analysis.
The instructions for the HUD states: In the case of “no cost” loans where “no cost” encompasses third party fees as well as the upfront payment to the loan originator, the third party services covered by the “no cost” provisions must be itemized and listed in the borrower’s column on the HUD–1/1A with the charge for the third party service. These itemized charges must be offset with a negative adjusted origination charge on Line 803 and recorded in the columns.
HUD FAQ’s 2010:
3) Q: How does a settlement agent show a ―no cost loan on the HUD-1?
A: In the case of ―no cost loans where ―no cost refers only to the loan originator‘s fees, a credit equal to the amount shown in Line 801 on the HUD-1 must be given in Line 802 of the HUD-1 so that the adjusted origination charge in Line 803 of the HUD-1 equals zero. In the case of ―no cost loans where ―no cost encompasses some or all third party fees and the origination charge, a credit should be listed in Line 802 of the HUD-1 to offset all fees encompassed in the ―no cost loan, resulting in a negative number for the adjusted origination charge on Line 803 of the HUD-1. The third party services covered by this offset must be itemized and listed in the borrower‘s column.The document linked below provides a thorough and brief (probably less than one minute to read) summary of your requirements in these situations. Please see page 41597 “Guarantors and Co-Signers”: https://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17585.pdf.
You can do a single-pay note. One thing to keep in mind is that section 1026.45(c)(5) of Reg Z (ATR/QM rules) requires the analysis using monthly, fully amortizing payments, so in order to comply with the ability to repay requirements you’ll need to need to divide the single payment up into monthly payments for considering the monthly payment and calculating DTI. Also keep in mind the loan won’t qualify as a QM since the payments aren’t periodic and substantially equal.
Do you have separate disclosures for each of these tiers now? If so, then you would include the fee applicable for each tier. If you use a combined disclosure then you can include the information for each tier, respectively, under your fees section. See the commentary 1026.40(a)(1)-4 below:
4. Method of providing disclosures. A creditor may provide a single disclosure form for all of its home equity plans, as long as the disclosure describes all aspects of the plans. For example, if the creditor offers several payment options, all such options must be disclosed. (See, however, the commentary to §1026.40(d)(5)(iii) and (d)(12) (x) and (xi) for disclosure requirements relating to these provisions.) If any aspects of a plan are linked together, the creditor must disclose clearly the relationship of the terms to each other. For example, if the consumer can only obtain a particular payment option in conjunction with a certain variable-rate feature, this fact must be disclosed. A creditor has the option of providing separate disclosure forms for multiple options or variations in features. For example, a creditor that offers different payment options for the draw period may prepare separate disclosure forms for the two payment options. A creditor using this alternative, however, must include a statement on each disclosure form that the consumer should ask about the creditor’s other home equity programs. (This disclosure is required only for those programs available generally to the public. Thus, if the only other programs available are employee preferred-rate plans, for example, the creditor would not have to provide this statement.) A creditor that receives a request for information about other available programs must provide the additional disclosures as soon as reasonably possible.
Neither Reg C nor the HMDA Guide give this as a reason for using N/A for the rate spread. Here are the reasons to us N/A according to Appendix A in Reg C
(https://www.ffiec.gov/hmda/pdf/2013guide.pdf):b. If the loan is not subject to Regulation Z, or is a home improvement loan that is not dwelling-secured, or is a loan that you purchased, enter “NA.”
c. Enter “NA” in the case of an application that does not result in a loan origination.
and
e. If the difference between the APR and the average prime offer rate is less than 1.5 percentage points for a first-lien loan and less than 3.5 percentage points for a subordinate-lien loan, enter “NA.”Here’s a link to information on an Rate Spread of NA from the HMDA Rate Spread calculator: https://www.ffiec.gov/ratespread/oldcalchelp.aspx. Scroll down to “Rate Spread Equal to NA”.
My interpretation of this is that it needs to be a margin that was actually used within the last 6 months.
In accordance with Section 100210 of BW-12, FEMA revised the minimum deductibles for the NFIP.
•The changes to the minimum deductibles are available only for new business and renewal policies that are effective on or after June 1, 2014.
•Insurers must advise affected policyholders of the new minimum deductible option as part of the renewal process, as all deductibles must comply with the new minimums.Here’s a notice from the NFIP that gives an overview of the changes: https://www.nfipiservice.com/Stakeholder/FEMA2/Attachment%20A%20Summary%20of%20the%20NFIP%20June%202014%20Program%20Changes.pdf
From the information you’ve given, it sounds like the investor isn’t reviewing the file and therefore isn’t making the credit decision. There is discussion in the commentary to Reg C that covers using an investor’s underwriting criteria. If you haven’t done so already, please take a look at the commentary 12 CFR 1003.1(c)-2-4. linked here: https://www.gpo.gov/fdsys/pkg/CFR-2014-title12-vol8/pdf/CFR-2014-title12-vol8-part1003-appI.pdf.
As for the adverse action, you should look at 12 CFR 1002.9(g) and your agreement with your investor to determine who should be sending the adverse action. But I would say that if the application isn’t being submitted to the investor then your bank should also be sending the adverse action.
Reg B 1002.9(g): https://www.gpo.gov/fdsys/pkg/CFR-2014-title12-vol8/pdf/CFR-2014-title12-vol8-sec1002-9.pdf
Reg B Commentary 1002.9(g): https://www.gpo.gov/fdsys/pkg/CFR-2014-title12-vol8/pdf/CFR-2014-title12-vol8-part1002-appI.pdf1002.14(a) Providing appraisals and other valuations. (1) In general. A creditor shall provide an applicant a copy of all appraisals and other written valuations developed in connection with an application for credit that is to be secured by a first lien on a dwelling.
There is no limit on DTI under the genearl ATR rules. You can go by your policy and even have an exception to your policy. If you are having and approving many exceptions to your DTI policy limit then you might consider raising your limit. I would recommend using the 43% as a watermark, so if you are below that you could consider raising to your comfort level. It can also be higher than 43%, but I would be hesitant to make it much higher.
I agree, if you do not have any introductory or premium rate then that won’t be a factor and you would use the fully indexed rate, which is your index (value at consummation) plus your margin.
First you need to determine if you have a prequalification or preapproval program or both. The commentary of 1002.2 and 1002.9 has discussion on these terms, but I have also linked an Fed document that, although a little old, has a good discussion on what constitutes each: https://www.phil.frb.org/bank-resources/publications/compliance-corner/2004/second-quarter/q2cc2_04.cfm.
Also, there are GMI requirements under Reg B 1002.13 that apply to applications for credit primarily for the purchase or refinancing of a dwelling to be the applicant’s principal residence and to be secured by that dwelling. If you have a preapproval program where you’ll be either approving or denying the preapproval, the request is an application (see commentary below). A prequalification becomes an application only when you make a decision about extending credit, so if you deny it then it’s an application and you must follow AAN requirements if needed.
Commentary 1002.2(f)(5): Examples of an application. An application for credit includes the following situations:
i. A person asks a financial institution to “preapprove” her for a loan (for example, to finance a house or a vehicle she plans to buy) and the institution reviews the request under a program in which the institution, after a comprehensive analysis of her creditworthiness, issues a written commitment valid for a designated period of time to extend a loan up to a specified amount. The written commitment may not be subject to conditions other than conditions that require the identification of adequate collateral, conditions that require no material change in the applicant’s financial condition or creditworthiness prior to funding the loan, and limited conditions that are not related to the financial condition or creditworthiness of the applicant that the lender ordinarily attaches to a traditional application (such as certification of a clear termite inspection for a home purchase loan, or a maximum mileage requirement for a used car loan). But if the creditor’s program does not provide for giving written commitments, requests for preapprovals are treated as prequalification requests for purposes of the regulation.
ii. Under the same facts as above, the financial institution evaluates the person’s creditworthiness and determines that she does not qualify for a preapproval.
