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:
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:
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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