FDIC Supervisory Insights Summer 2009

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From the Examiner’s Desk continued from pg. 33 mortgage lender. This represents no change from previous high-cost mortgage loan prohibitions. However, unlike higher-priced mortgage loans, prepayment penalties on high-cost mortgage loans may not be imposed when, at consummation, the consumer’s total monthly debt payments, including amounts owed under the mortgage, exceed 50 percent of the consumer’s monthly gross income. This represents no change from previous high-cost mortgage loan prohibitions. This particular Comparison of Higher-Priced and High-Cost Mortgages Higher-Priced Mortgage Loans (Purchase-Money, Refinancings, and Home Equity Loans) [10/1/09 and later originations] Thresholds Thresholds based on average prime offer rate: APR must exceed the average prime offer rate by at least 1.5 percentage points for first-lien loans and 3.5 percentage points for subordinate-lien loans. Prohibition May not rely on the collateral securing the loan without regard to the consumer’s ability to repay. Prohibition May not rely on the consumer’s income or assets without verifying such amounts through reasonably reliable third-party documents. Prohibition May not impose a prepayment penalty after two years. Prohibition May not impose a prepayment penalty at any time if n other applicable law prohibits such penalty; n the consumer’s mortgage payment can change during the first four years of the loan term; or n the source of the prepayment funds is a refinancing by the same mortgage lender or an affiliate. High-Cost Mortgage Loans (Refinancings and Home Equity Loans Only) prepayment penalty restriction for high-cost mortgage loans under section 226.32 was the only restriction not incorporated into the prepayment penalty provisions for higher-priced mortgage loans under section 226.35. To summarize key features and prohibitions of higher-priced and high-cost mortgages originated on or after October 1, <strong>2009</strong>, and high-cost mortgages originated prior to October 1, <strong>2009</strong>, a side-by-side comparison of these categories of mortgages appears below. High-Cost Mortgage Loans (Refinancings and Home Equity Loans Only) [10/1/09 and later originations] [pre-10/1/09 originations] Thresholds based on either Treasuries
Comparison of Higher-Priced and High-Cost Mortgages Higher-Priced Mortgage Loans (Purchase-Money, Refinancings, and Home Equity Loans) [10/1/09 and later originations] Prohibition May not fail to escrow for property taxes and mortgage-related insurance when the mortgage loan is secured by a first lien Prohibition May not structure a home-secured loan as an open-end plan to evade Regulation Z’s higher-priced mortgage provisions. High-Cost Mortgage Loans (Refinancings and Home Equity Loans Only) [10/1/09 and later originations]
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Page 49 and 50: Subject Summary Joint Statement by
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FDIC Supervisory Insights Summer 2009

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