After reading about the issue of the points and fees for the greater than trigger of $480 vs. 8% of the loan amount, I thought it would be helpful for our lenders to have a chart starting at $5000 and listing what 8% of the loan amount is in order to have a quick way of determining if the points & fees trigger comes into play.

Here's my question. The reg states the trigger as 8% of the loan amount which is defined as the "amount financed" as provided in 226.18(b). However, HOEPA says that credit life insurance must be subtracted from the amount financed. After subtracting the credit life premium we now have a net "amount financed".

For our home equity loans we have a flat amount of $150 for closing costs. So, when preparing the chart, I think I should subtract $150 from each amount, ($5000 becomes $4850, $6000 becomes $5850, etc.) when calculating the 8% of the amount financed since PPFCS are subtracted when calculating amount financed.

Is this correct?

I believe you are correct. HOEPA has a different meaning for "amount financed" (AF) then other sections of TIL. As I read 226.32, HOEPA's AF = loan amount - all HOEPA points and fees.

Also remember that all loans with a HOEPA AF of < $6000 is not triggered until the fees are > $480, not 8%.

Thanks David. I knew you'd have the answer. I hereby proclaim you BOL's HOEPA guru!

No thank you!

Oh, you can't refuse proclimations. You should amend your BOL sig to include:

The Master of Flood Disaster
The Helper of all that is HOEPA

Andy's right. The proclamation deed is done! And after all, if you see it on the internet you know it is the truth ...

As long as we're on HOEPA, if a loan is HOEPA covered because of credit insurance, is the insurance premium included in the disclosed APR? Also, does the 3 day disclosure requirement basically make the full waiting period 6 days when you add in rescision?

Keep the Finance Charge for APR's and HOEPA separate. Although a fee may be a fee for HOEPA (in-house appraisal, optional credit insurance, etc.) it is not (necessarily) a finance charge for calculating the APR.

HOEPA will require the disclosure 3 days before closing and these loans most likely will be subject to rescission requiring 3 more days. In most cases, Kim is correct that there will a minimum of 6 days to close and advance this money. Therefore, loan officers will need to do a good sales job of explaining this. If borrowers figure out that credit insurance took them over the HOEPA limit, they most likely will want to back out of the insurance.

I hesitate to mention this to loan officers, but I trust that the average BOL reader can handle this info:
HOEPA does not require 3 days BETWEEN the HOEPA disclosure and closing of the loan (like RofR). Instead, HOEPA says I can close ON the 3rd day after giving the HOEPA disclosure.

Here's a quote from the Commentary to section 226.31(c)(1):
1. Pre-consummation waiting period. A creditor must furnish §226.32 disclosures at least three business days prior to consummation. Under §226.32, “business day” has the same meaning as the rescission rule in comment 2(a)(6)-2--all calendar days except Sundays and the federal legal holidays listed in 5 USC 6103(a). However, while the disclosure rule under §§226.15 and 226.23 extends to midnight of the third business day, the rule under §226.32 does not. For example, under §226.32, if disclosures were provided on a Friday, consummation could occur any time on Tuesday, the third business day following receipt of the disclosures. If the timing of the rescission rule were to be used, consummation could not occur until after midnight on Tuesday.

This doesn't help a whole lot, but it may be worth knowing. The problem I see is that the average loan officer will get this confused and then start treating RofR the same way. It is probably best to stick with the "3 days between" rule on both HOEPA and RofR.

I came across this article from the Dallas FRB looking up something else and thought it may be of use.

Andy, that was a very good site. Thanks for the information.

Andy,

Thanks for the info on the dallasfed website. Our cr lf
agent just asked about the impact HOEPA would have on the bank. Just want to say thanks a $million.

richard,

when your're good you're good! take all the acalads you can
get.

thanks for all your insights. this site is a blessing for compliance officers.

thanks to all who have the ability to respond to our questions and provide meaningful comments and direction.

the comments expressed are not necessarily that of my employer (but they should be).

DAVID DAVID DAVID
I MEANT TO SAY DAVID!

I HAD RICHARD ON THE BRAIN!

Regarding HOEPA fees, I understand that if the customer is utilizing a bank-affiliated service provider, that the charge of that service provider goes into the Section 32 points and fees calculation. Question being, if the Bank requires the use of an attorney for document preparation and conducting settlement, and the attorney required is a director of the Bank, do the attorney fees as a Bank affiliated service provider become a fee used for HOEPA calculation?

Not necessarily. An affiliate means "control" or 25% ownership. If the director controls the bank or vice versa, the fee paid for the doc prep counts towards the Section 32 fees. Otherwise, they do not count.

Thanks Andy for that helpful article at the Dallas Fed.

I am somewhat confused on the handling of appraisal fees under HOEPA. David D., the jedi master of the subject, indicates among thecommon points and fees to be considered are appraisal fee if conducted internally. The 226.4 reference on points and fees says "Appraisal, investigation, and credit report fees" but doesn't mention the internal part. Also, the Dallas Fed example under the Points and Fee tests includes a $200 appraisal fee that was added in Step 1 of the example. The detail about the loan example only mentions the $200 appraisal fee was financed.

Can anyone clear this up before I screw up the training here for HOEPA ? Thanks in advance

Read the fees section carefully and you will find that 226.4 fees do count if the lender or an affiliate of the lender makes any money from a fee. If the bank conducts an in-house appraisal, the fee for the appraisal must be included in the HOEPA fees test calculation.

OK now that I know why and when, what about how? In preparing for the 10/1 deadline, I have been looking for the text of the required disclosures to be given when a loan is covered under HOEPA. Apparently the forms vendors are not designing a form. Any help on where I can get this information/format would be greatly appreciated. Thanks, Vicki

I was also very frustrated with the forms vendors on this one. Many said that they didn't think it would apply to their clients and refused to update their software for the HOEPA changes. We have designed a HOEPA worksheet in Excel (actually Louvera Walden did the initial designing & we tweaked it) that also includes the disclosure notice on the 2nd tab. You can find this at our web page. You can also find the disclosure wording at §226.32(c)(1).

Vicki, the language is in Appendix H-16 of Reg. Z. Make sure that you have the most updated version. They added verbiage with the revisions to include notifying the customer if it contained credit life.

Okay, I'm lost in the everglades and an alligator is coming after me! IF you need to add the 3 day ROR and the 3 day HOEPA dis. When do you disclose these. Aren't they both 3 days prior to closing? How do you arrive at 6 days?

Watch out for those alligators!!! HOEPA disclosures are to be given 3 business days BEFORE closing. ROR gives the borrower 3 business days AFTER closing to rescind. If both HOEPA and ROR apply, there are 6 business days between giving the HOEPA disclosure and when the ROR period ends. Hope this helps keep those alligators at bay.

OOPS, yes I think this advice will. Thank you very much. Happy Tuesday to you.

david, that was a very helpful link..one question.. the Q & A forum said that all consumers entitled to rescission should also receive the HOEPA disclosure 3 days prior to loan closing..Even on non-HOEPA loans?? Am I misunderstanding?? thanks in advance!

It is true thall ALL consumers entitled to rescind need to receive the HOEPA disclosure 3 days PRIOR to consummation when you have a loan subject to these requirements. If a loan is not subject to HOEPA, then you don't provide the HOEPA disclosure.

Would a mortgage registration tax collected at closing be included in the HOEPA fees and points test? Thanks. This reg makes me nauseous.

I thought that you could not draft a table of "points and fees" threshold per loan amount because the threshold is a percentage of the "total loan amount," and that term is impacted by the amount of odd days interest. So, the "points and fees" threshold will be higher on the first day of the month and the last couple of days of the month than in the middle of the month (assuming that the payments are due on the first of the month).

BTW, it is a shame that David's HOEPA worksheet and disclosure do not include formulas for calculating the maximum payment amount for an ARM loan. You really got my hoepa up.

David, I noticed that your HOEPA disclosure includes two signature lines. The Model Sample H-16 does not. Nor does it include the date. The question has come up that if the disclosure is not dated, how do you show that you gave it 3 days in advance as required? Should it be dated (and signed)??

Good point. There should be a date on the form. I feel that the form should be signed, although this is not required by regulation.

Help me! Help me! I thought I had a handle on this stuff, boy was I wrong. The worksheets are great, but I'm really stuck on the "loan amount". We start with amount financed (I think I can figure that) but then we subtract any of the fees that are not finance charges????Is that right? Does it matter if the fees are financed or paid in cash? Orignally, I was just plugging in the fees and using the "actual" loan amount.

I'm much confused. To calculate the loan amount,do I start with the amount financed and then subtract the fees that are not finance charges? Is that how is works on your worksheet? Thanks in advance for any guidance.

tressaj,

To calculate total points and fees, you start with your total finance charges excluding interest, then add any fees paid to mortgage brokers, then add any fees that you normally exclude from the finance charge under section 226.4(c)(7) only if your bank will be receiving direct or indirect compensation or the fee is paid to the bank or an affiliate. (For example, if the customer pays an appraisal fee that was conducted by a bank employee or an affiliate of the bank you would include the cost of the fee in the calculation.) Next, if the customer obtains credit life insurance, you include the premiums in the calculation. Once you get the total of all the above you need to move to the next calculation.

You need to calculate the total loan amount. Start out with the amount financed on your Truth In Lending disclosure then subtract those fees that are normally excludable from the finance charge under section 226.4(c)(7) of Regulation Z but for which the bank will receive direct or indirect compensation or the fee will be paid to an affiliate only if such fees are financed. This means that the appraisal fee referred to above is only subtracted from the amount financed if the customer is financing it. If the customer paid it at the time of application, it does not get subtracted from the amount financed here. It would be included in the calculation for total points and fees. The result is the total loan amount. You then take your total points and fees and divide them into the total loan amount to see if the result exceeds the greater of $480 or 8% of the total loan amount.

Andy Z had provided a link in a post to an article on the FRB of Dallas' web site that gives a nice explanation of this. If you search the FDIC compliance manual you will find HOEPA worksheets based on the rule currently in effect. You would have to modify them to address the inclusion of credit insurance premiums and the changes to the APR test threshold based on lien position.