FINANCE CHARGES AND OTHER ITEMS THAT COULD CAUSE YOU TROUBLE IN AN AUDIT IF YOU DO NOT COMPLY
FACTS
Some items in Section 32 mortgages which are not included in the finance charges are:
- Any bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either, unless the charge is otherwise required to be included .
- Up to two bona fide discount points paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed: The average prime offer rate by more than 1%.
- If no discount points have been excluded, then up to one bona fide discount point paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed the average prime offer rate by more than 2%.
- All compensation paid directly or indirectly by a consumer or creditor to a loan originator that can be attributed to that transaction at the time the interest rate is set.
- Real estate fees (other than amounts held for future payment of taxes), unless (the charge is reasonable; the creditor receives no direct or indirect compensation in connection with the charge; and the charge is not paid to an affiliate of the creditor):
a. Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.
b. Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.
c. Notary and credit report fees.
d. Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest infestation or flood-hazard determinations. (1026.4, 1026.32)
MORAL
There are other exceptions. These are just some key ones. Although not included in finance charges, some of these can be included in the loan originator points under specified conditions such as the supplier is an “affiliate” of the loan originator or loan originator organization.
A SMALL SUMMARY OF WHAT YOU SHOULD KNOW ABOUT THE MORTGAGE BEFORE THE BORROWER SIGNS THE DOCUMENT TO BUY OR REFINANCE THE HOME
FACTS
The borrower should be able to repay the loan. The terms of the loan should be safer for borrowers. The loan should also be easier to understand. That means qualified mortgages do not have complicated and risky features such as negative amortization or interest-only periods.
The lender has to evaluate ability to repay the loan, but just because the lender is willing to loan a certain amount, doesn’t mean it is right for the borrower. The borrower still has to decide if the proposed loan payment fits comfortably in the borrower’s budget and allows the borrower to achieve other goals.
MORAL
Look over the monthly payments for the mortgage with the borrower. Figure how long it can last if the borrower is suddenly unemployed. Can the payments be kept up? Can the borrower obtain assistance from family members? Thinking this out can save stress in the long run and lets the borrower know you care thereby instilling greater trust and the potential to close the loan.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
