Here are some points to ponder!
Determine Policy on the Following:
1. How will you calculate rate presented to LO? (LLPA’s baked in or not?)
2. What will you do with over par and under par pricing? (credit to client or put into the points and fees?)
3. What are your finance charges?
4. What will be included in your points and Fees?
5. Will you have a buffer in your points and fees just in case?
6. What will you do with Bona Fide Discount?
7. How are you going to handle the QM calculations process? Technology?
8. Where in the process will you present the pricing? Offer all options to client which is better for fair lending or Verify QM after lock?
9. What about your Wholesale Business? Different Methodology!
10. How will you demonstrate consistency in your secondary marketing methodology?
All of these decisions take a lot of thought revolving around procedural changes, workflow changes, training and technology upgrades.
Thanks for posting. Would you be able to reduce the finance charges with applying a lender credit to those finance charges , hence changing the amount financed. I understand Reg Z to allow seller credits to be applied to finance charges but am teying to figure out how or if lender credits play into QM.
Hi Erin, The terminology surrounding this regulation leads to quite a bit of confusion. First, remember that Points and Fees do not equal Finance Charges. They are different and I have these charts posted on the blog under “QM Points and Fees” calculation. Lender credits are still fine whether they are for finance charges or other charges. The issue is how much will those fees that are baked into the rate affect the APR and will this cause the APOR + 1.5% to exceed the APR on the loan. If you have a higher risk client with lender MI baked in along with other charges, chances are good your APR calculation will be exceeded and you will end up with a higher priced mortgage loan. Based on your question, I will do a couple of examples in an article this week to try to make the whole “lender credit” easier for everyone to understand. Many thanks for your feedback!