Case Study - Pay Attention to the Details
A mortgage loan originator (MLO) did a good job of testing an applicants loan to insure the loan did not exceed the fee and rate threshold requiring a HOEPA disclosure as a high cost mortgage. The interest rate test showed that the loan APR was 1/8th below the previous months published APOR and was considered “safe”.
Two days before closing the borrowers advised the MLO that
their parents decided to give them a substantial gift and that they would be
making a large down payment on their home loan. The MLO was delighted because he
knew that with the down payment the loan was insured to close.
Is there anything else the MLO should have thought of? In other words, would a lower loan amount affect his previous test or is he still in the clear?
www.mymortgagetrainer.com
www.mymortgagetrainer.com
Yes, the loan was in violation of the high cost rules when it closed. The finance charges caused the loan to exceed the 8% APR interest rate trigger. The MLO should retest the loans. This loan required high cost disclosures.
ReplyDelete1 of 1
ReplyDeleteI feel like I need some clarification on this one, because my understanding on HOEPA leads me to believe that a large enough down payment on this home might take it out of the "high cost mortgage" bracket. If this is the case, I think the MLO would need to disclose that information and let the buyer know the changes in APR rates, monthly payments, etc. The MLO may need to retest the loan option and provide all new and required information to the buyer.
Yes, the LO should retest the loans if there is any material change
ReplyDeleteYes, every time that there is a significant change on a loan such as collecting a large down payment, the MLO should retest the loan to see if there is a change on the interest rate or loan amount. By not retesting he missed the fact that this loan is no longer “safe” and has triggered a rule of HOEPA.
ReplyDeleteThe loan officer should re-evaluate the loan to determine if the fee and rate threshold changes will require HOEPA disclosure due to the higher down payment
ReplyDeleteThe MLO should have thought of new circumstances of the borrower and considered any changes that might occur. MLO should do a good job of testing loan again with new factors and disclose to borrower of new rate or loan amount.
ReplyDeleteYes, this change of downpayment will need the MLO to reevaluate for sure given the down payment will call for HOEPA disclosure
ReplyDelete1 of 1:
ReplyDeleteAnytime there is a change to a loan a MLO must always check to see what may change in the loan and may have a new option for the home buyers that may be better or worse case scenario.
1 of 1
ReplyDeleteA change in the loan amount will change back end numbers for finalizing the loan which in turn which could trigger HOEPA