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This means that creditors can bake that into the rate too. Second, unless specified, closing costs that a creditor pays and recoups from the consumer over time and THROUGH the interest rate are NOT counted in points and fees. First, points and fees calculation are those fees known at or before loan consummation. There are a couple of things to remember. Any Seller points are excluded from the points and fees calculation, to the extent that they are presently excluded under Finance Charges.
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Caution! Most PMI is not set up that way so let us hope they change, or that monthly premiums become your norm. PMI that is paid upfront AND is refundable on a pro-rated basis AND it is automatic, you only need to use the difference between that amount and the amount of an FHA upfront premium. I believe the CFPB would like to see ALL affiliate arrangements gone. This doesn’t mean the difference between what you charge and what the market charges. For instance, if your company has an affiliated title company, whether or not you use them the entire amount of the title charges will be in your points and fees calculations. If the creditor or the originator has affiliated arrangements, the entire amount of the charge will be included in the points and fees calculations.The amount included in Points and Fees is NOT equal to the Finance Charges for APR although there are some similarities.Your ability to profit too much is why they have the APR and APOR test! The examiner will look at what the originator was offered and do the calculations from there.So, that means you will either need to do that before you present pricing, or they will be included in the points and fees calculations. I point blank asked an attorney for FNMA if they were planning on baking in their pass-through LLPA’s into the rate and the answer is NO.Higher rate=potential to flunk the other two tests! Don’t get too excited! Remember the other two tests I talked about? Too high of a rate with LLPA’s or lender contributions = higher rate. LLPA’s that are “baked” into the rate at the creditor level and displayed to the loan originator with them baked in without additional risk adjustments, are not part of the points and fees calculation because they exist in the rate. LLPA’s ARE included in the points and fees calculations IF, you as the creditor, present your pricing with LLPA’s.You’ll see why as I take you through the calculation. While everyone was talking about what is in the points and fees, little conversation was centered on the other two tests. For a QM you must pass the 3% test, the APOR to Interest rate test and the APR to APOR test.Then I will show you what I believe (through countless industry confirmations) is a thoughtful approach to each business line. Lawyers make us all say these things!įirst, the Overview and then the Nitty Gritty for The Creditor and then The Broker.įirst, let’s clear up what I believe are common misinterpretations. However, these are my opinions and in no way reflect the opinion of my employer, Optimal Blue. Yet, I heard it along with several other hundred people and when compared to their exam guides, guidance, seminars and regulations it makes sense. It was tough to get everyone on the same page, and to be honest no one will put it in writing beyond what they said. I confirmed the calculations with several industry consultants, the general counsel of the CFPB, the counsel for a very large bank and an attorney with FNMA.
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So Where Did I Come Up With This Information? Today I will focus on just the points and fees calculation as it relates to pricing your loans in the new world. QM loans must meet ATR and Points and Fees calculation to be Purchased by the GSE’s. Yes, I said calculations (plural) because it is not just “what goes into the 3%” that must be considered. I spent an exhaustive amount of time getting everyone on the same page because as a pricing engine it is necessary for us to offer a platform that does these calculations correctly prior to January 2014. What is included in the Points & Fees? How do we know if we have a QM Loan? Much discussion has occurred around this issue with differing opinions from industry consultants.