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9/03/2013

BANK REFUSES TO CLOSE MY DINKY HOME LOAN!


MY LENDER WON'T CLOSE MY LITTLE LOAN

Bank can't close as there were changes after we locked and says this is a HPML

What are Higher Priced Mortgage Loans?

 
Week of 09/02/2013
Term (in years)
5*
10
15
20
25
30
APOR
3.44
4.51
3.64
3.64
4.57
4.57
Margin
1.5
1.5
1.5
1.5
1.5
1.5
HPML APR Tolerance
4.940
6.010
5.140
5.140
6.070
6.070

 

Weekly Average Prime Offer Rates for Adjustable Rate (ARM) Loans
Week of 09/02/2013
Term (in years)
1/1*
3/1
5/1
7/1
10/1
APOR
2.90
2.92
3.04
3.37
3.86
Margin
1.5
1.5
1.5
1.5
1.5
HPML APR Tolerance
4.400
4.420
4.540
4.870
5.390

 

     * Amortization or adjustment rate terms may not be available in current product offering.

 Higher Priced Mortgage Loan (HPML) test implemented under Regulation Z is a tricky rule. The HPML rule applies to Conforming and Jumbo loans for Primary Residences with an APR that is 1.5% or more above the Average Prime Offer Rate (APOR) for loans secured by a first lien. APORs are published each Friday and are effective the following Monday. Once the loan is locked, the APOR used for that loan does not change.

If the APR is equal to or exceeds the HPML APR tolerance, the loan is HPML and will be un-saleable in the Secondary market. If a $55000 mortgage is going to cost a lender $10000 to close because of this rule there is no money to pay the huge penalty. Many banks, brokers, mortgage bankers don't want to mess with a loan that they might earn $200 on for the risk of having to pay that $10000. Although Dodd Frank set this rule to protect Borrowers from being switched to a costly loan, the rule is a Catch 22.

 

What Causes HPML Loans?
There are several things that may cause a loan interest rate to go above the APOR:

·         Lower loan amounts – the impact of fees on the APR increases as the loan amount decreases. A $100,000 loan is more likely to trigger an HPML than a $300,000 loan.

·         Mortgage insurance – The loan may have MI over a longer period of time because the LTV is in excess of 100% (common in HARP loans).

·         Shorter loan terms – APR fees are averaged over the term of a loan, so the shorter the term, the higher the fee (a 20 year loan will have a higher APR than a 30 year loan).

          Locking a loan before you know the property is something different than you were told upfront

          Changing a loan request

          Adding or deleting a Borrower with lower FICO score

          FICO score change on Borrower with long extended escrow due to New Construction taking longer than planned or delays by Seller

           Locking a loan on a Short Sale to find substantive changes to package after months of wait and hold

      Discovering additional fees from Escrow, Attorney or Title
Borrower’s failure to disclose facts                                                      
Condo complexes that add huge fees after the fact for information and transfer.

LENDERS CAN’T CLOSE A LOAN THAT COSTS THEM THOUSANDS OF DOLLARS

ORGINATORS SHY AWAY FROM TAKING LOANS UNDER $120000 BECAUSE DODD FRANK’S HPML RULE IS A CATCH 22

How to Resolve an HPML Issue
If you receive a notice of HPML there are a number of different ways to reduce the APR:

·         Apply a seller credit to the APR fees

·         Lower the APR fees

·         Reduce the discount (if there is one)

·         Lengthen the term of the loan

·         Increase the premium paid to the borrower

·         Reduce the note rate

 

WHAT CAN A BORROWER DO?

          Disclose vesting type upfront

          Provide existing mortgage statement

          Get cost commitments from HOA or Management Companies upfront 
      

Don’t lock upfront on a delayed purchase such as short sale or new construction if you need have no real idea of closing date.


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