No doubt that most lenders are doing their best to try to adjust to the new regulations and stay in business. Yet the reality is that no matter how much you prepare, chances are good that loans are going to fall through the proverbial crack. Or, you may find that the way you thought you should do things is not correct.
The next checklist focuses on a Monitoring Methodology. Watching each loan like a hawk during the next 90 days will define your success with the new regulations.
During The Process:
How will you track the following and archive it, per file, for future retrieval? This should be done as a quick 1-2 page synopsis on each file. You will need this to defend your company, or for exam purposes.
_____ Base Price/Rate
_____ LLPA’s Defined Separately
_____ Fully Adjusted Price/Rate (with LLPAs for that specific client)
_____ Bona Fide Discount Points allowed and how they are applied?
_____ Price Above or Below Par and how that was applied to the loan?
_____ Seller Contributions
_____ Affiliate Fees (portion that you retain as gross profit)
_____ Higher Priced Mortgage Test-Actual Numbers and Calculations
_____ APOR used in pricing
_____ Fees on loan (keep consistent for fair lending)
_____ APR & how it was calculated
_____ What dollar amounts are in the points and fees for that loan?
_____ What is the Amount Financed? NOTE: The 3% Points & Fees is calculated off of amount financed, NOT the actual loan amount.
_____ Does your written secondary marketing methodology match your actual methodology?
_____ No Toxic Features on Loans
_____ Pricing Disparity between entities (big fair lending issue)!
_____ Reason loan was not originated or fell out. Keep great records on this to distinguish how QM is affecting your production. These numbers will assist you in budget planning.
_____ Final QM Closing Check
_____ If you are doing QM without safe harbor, how do you perform a budget with the client? In-house budget for the client? Third party home buying counselor? (While this is not required under regulation, it is a very prudent practice to defend your company with in a rebuttable presumption claim).
_____ What was not purchased due to QM issue?
_____ What was the issue?
_____ Categorize these issues with corresponding numbers/percentages.
_____ React immediately to changes needed in your calculations or systems to stem loan losses.
_____ Continue working toward complete integration. Those who have achieved that are having a much easier time!
Bottom Line: Stay on top of this, stay flexible and expect some issues. You cannot be perfect when the guidelines are not more highly defined than they are. The good news is that by Spring/Summer you should have a good grasp on what works and what doesn’t, if you track it very well.