Posted by ILNot on 12/20/05 8:51am
Msg #83584

Why is the loan amount higher?

Why is the loan amount on the HUD (these are examples) $250,000, and the loan amount on the mortgage is $250,000 and the 'amount financed' on the truth in lending is $236,724. The diffrence is not the cash to borrowers. TIA

Happy Holidays to all!

Reply by Art_MD on 12/20/05 9:00am
Msg #83587

There should be a sheet with an explination of the TIL in most refi packages.
VERY briefly, loan amount minus (fees, points, and origination fee) = amount on TIL.
(I have not gone into detail as to what fees are or are not subtracted)

Art

Reply by ReneeK_MI on 12/20/05 11:42am
Msg #83648

APR Fun Facts, or why I LOVE being a SA instead!

Fees included in APR (and subtracted from loan amount to obtain Amount Financed) are also the same fees which control the Section 32 calculation (for high-cost fees/Predatory Lending laws). So, whether or not a fee gets included in APR is serious business.

Anything connected to obtaining the loan, paid by borrower, directly to lender, mtg broker, title agent or any third party UNLESS it is on the list of things considered non-discretionary (THAT is the very, very, VERY short version):

Title policy premium - NOT in APR (everyone pays, nobody gets out of it, not discretionary)
Appraisal fee - NOT in APR
Fees to Real Estate Agents - NOT APR (not connected to obtaining loan)
Interest Adjustment/PP Interest - IN APR, as it's acutally interest
Recording fees pd DIRECT to county - NOT in APR
Escrow impounds, tax pymts, H/O pymts - NOT in APR
"recording and handling" pd to TITLE - amount over usual recording cost IS in APR
ANY fee pd directly to Mtg Broker (incl. appraisal, if being pd to Broker directly) IS in APR
Processing, doc handling, mobile closer, wire in/out fee, any obvious 'padding' type fee IN APR

You have to get a 'feel' for it - as soon as a fee is on this/that list, a new one gets invented.

All those 'APR-included' fees are added up, subtracted from Amount Financed - to illustrate to borrower that yes, you're borrowing X amount, but YOU'RE PAYING this amount in advance, so subtract that and here's your EFFECTIVE amount, and all those APR fees are calculated into the actual interest rate of the loan AS IF they were 'pre-paid interest', and the APR is then the amount your interest rate WOULD BE, in this hypothetical scenario.

Having fun yet? Ok, NOW ... take the amount of all the 'APR' fees, and run them through the Section 32 calculation to make sure the borrower's fees aren't over the allowable amount, which would make it non-compliant w/ Section 32 (of the TILA, Reg Z )and set in place a whole bunch of new documents/procedures in order to close compliantly.

THIS is one reason you may see your SA fee less than what you're actually being paid, and common nowadays (a real word?) for recording fees to be, say, flat $100 and pd TO TITLE AGENT, as one example of how to keep APR lower. Once a Hud is finalized and run through a final APR calculation - if it exceeds Sect. 32 calculation, it's the Broker's fee that's first to get sliced.

I gave myself a headache.

Reply by clarise_oh on 12/20/05 9:01am
Msg #83588

The amount financed is the loan amount minus the prepaid closing costs.

Reply by Anonymous on 12/20/05 9:01am
Msg #83589

Because the amount financed on the HUD deducts pre-paid finance charges from the loan amount.

Reply by Becca_FL on 12/20/05 9:10am
Msg #83593

Wrong Anonymous

I think (hope) you are just confused or typed the wrong acronym (sp) by mistake. Care to correct your error, so you do not mis-inform others?

Reply by ILNot on 12/20/05 9:15am
Msg #83598

Thank you!

I knew that! Duh, I was having a brain freeze (literally it's 11 degrees).

thanks!

Reply by Charm_AL on 12/20/05 9:18am
Msg #83601

Re: Thank you!

Is there snow on the ground? My little one is looking forward to snow next week. She only gets to see it over the Christmas season if we're lucky.

Reply by ILNot on 12/20/05 9:28am
Msg #83606

Re: Thank you!

There is snow but it's just the big mounds that the plows created and it's dirty. Not the pretty snow. sorry.

Reply by Art_MD on 12/20/05 12:34pm
Msg #83663

Re: if you want clean white snow..

Go to Alaska.
There you'll find 14 million acres (+/-) of snow and wilderness there. More people need to go see it - you're paying for it in higher gas prices. The tree huggers out there are fighting so hard to keep the oil out of reach and the 2000 acres needed for drilling pristine (an estimate 100 people total have ever been within 5 miles of the proposed drilling site). That 100 is total for the last 10,000 years.

Art

Reply by Charm_AL on 12/20/05 9:12am
Msg #83597

yep, closing costs and anything else they can add in there.

Reply by PAW_Fl on 12/20/05 9:43am
Msg #83611

How do I explain the calculations for GFE, TIL, Itemization of Amount Financed, and Loan Amount?
by Richard Insley, BOL Guru

Question: I am a loan officer with 16 years lending experience who is new to mortgage lending. I am having trouble following the calculations used for tying together the GFE, the TIL, the Itemization of Amount Financed and the Loan Amount. What explanation can I use for my borrowers which does not rely solely on their trust in me or uses the "blame the confusion on the government" gambit?

Answer: You're on the right track--if you can't understand the numbers, your customers will be hopelessly confused.

As you've no doubt discovered, the GFE/HUD-1 can satisfy Reg Z's itemization requirement in a RESPA transaction. Nevertheless, you need to determine which of the fees and charges on the HUD-1 are Prepaid Finance Charges to be sure they are included in your TIL calculations and disclosures. Don't rely on the preprinted line item descriptions--ask what each fee is for, why it's charged, whether there's any upcharge, and other questions that will help you determine which ones are Finance Charges.

If the GFE is substantially different from the HUD-1, determine if the early numbers really were given in "good faith", or the bank is simply following a "close enough for govt. work" approach. There can be differences, but you should correct any practice that causes inaccuracies that are known at the time the GFE is prepared.

It's not too tough to explain the difference between the loan amount and the AF: AF equals the principal loan amount minus the Prepaid Finance Charges.

First published on BankersOnline.com 04/07/03