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?

	Weekly Average Prime Offer Rates for Fixed Rate 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.

High Priced Mortgage Rule

High cost mortgage loans

Buzzards in Lending Tree

 

Office of Consumer Financial Protection (Bureau) issued the “final rule” to the Dodd-Frank Wall Street Reform and Consumer Protection Act's amendments to the Truth in Lending Act and the Real Estate Settlement Procedures Act with the intention that this would protect consumers from getting bad loans. The final rule expanded the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA).  Consumers who want to move ahead with a high cost mortgages receive information about homeownership counseling providers.

Certain practices were banned with the intention to help borrowers who 1. Didn’t read the disclosures they signed or 2. Couldn’t find a better deal. The rules were supposed to help the individual consumer but in some circumstances the rule harms them. This is exampled in loans under $10000, loans with layered pricing adds and certain high loan to value HARP and HomePath products.

High cost mortgage rules limited the following situations:

• Balloon payments were banned, unless they are for the seasonal or irregular income of the borrower, or part of a short-term bridge loan, or they are made by creditors meeting specified criteria, including operating predominantly in rural or underserved areas.
• Creditors are prohibited from charging prepayment penalties
• Late fees are restricted to 4% of the payment that is past due, fees for providing payoff statements are restricted, and fees for loan modification or payment deferral are banned.
• Creditors originating HELOCs are required to assess consumers' ability to repay.
• (Creditors originating high-cost, closed-end credit transactions are required to assess consumers' ability to repay under 2013 Ability-to-repay. Ability to repay by either tax returns, w-2 forms, or bank deposits?
• Mortgage brokers are prohibited from recommending a consume default on a loan to be refinanced by a high-cost mortgage.
• Before making a high-cost mortgage, creditors are required to obtain confirmation from a federally certified or approved homeownership counselor that the consumer has received counseling on the advisability of the mortgage.

HIGH PRICED MORTGAGE LOANS ARE NOT Saleable to the GSE’s so  a lender who finds the spread exceeds 1.5 percent over the Average Prime Offer Rate must either reduce the costs or eat the loan.

WHAT is the HPML TEST?  DODD FRANK are two guys who don't understand consumers or mortgage banking.

If a current loan scenario is unsellable because it failed the federal HPML test, the lender is stuck. The APR exceeds comparable Average Prime Offer Rate by 1.5% or more (or 2.5 for Super Jumbo).

Based on the date the interest rate is set (locked or re-locked), lenders must compare their APR with the Fed’s APOR index. The loan will be considered a higher-priced mortgage loan if the APR exceeds the APOR index by:

–        1.5 or more percentage points on First Liens

–        2.5 or more percentage points on Jumbo First Liens

–        3.5 or more percentage points on Subordinate Liens

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. Unfortunately there are fixed costs that are the same for a $300000.

mortgage or a $80000. loan

Mortgage insurance on loans over 100% LTV – 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).

Certain products such as HOME PATH that has high loan to value and no mortgage insurance

Borrowers who apply for smaller loans with layered risks will hav difficulty finding a lender. For example a borrower with lower FICO score wants to purchase a condo in Laguna Woods as an investment. There are so many pricing adds, that no rate can accommodate the request. Catch 22.