Posted by Joanne_NY on 2/1/06 6:41am
Msg #92855

Reverse Amortization - Two Truth in Lendings

I went to a "Reverse Amortization" closing last night which, when the package was examined had two truth in lendings. I called the LO and was told that one was the banks and one was the brokers. Upon examination, they were completely different with two different payments, interests and terms. I was very confused and the Broker then explained that this was a reverse amortization ... therefore there were two. Still didn't make any sense. The borrower then got on the phone with LO and asked what interest rate he was paying ... was told 2% fixed for five years ... note, however, said 3.7%+index from the date of first payment ... rate he was being charged, not rate he was paying ... very confusing, and after two hours ... did not close. Has anyone else ever run into the two truth in lendings or these reverse amortizatins?

Reply by patricia on 2/1/06 7:59am
Msg #92871

this sounds like the same thing as negative amortization which is common, but I have never
seen it with 2 truth in lending forms.

Reply by DellaCa on 2/1/06 10:35am
Msg #92953

Re: Msg #71045 is on this topic

Never heard of Reverse Amortization. I have not had an answer yet that satisfied me , Hope someone answers that can help.I have had some that are ok with it and some will not sign 2 of them ,I would not want to either.

Reply by patricia on 2/1/06 10:46am
Msg #92960

Re: Msg #71045 is on this topic

it sounds like the 2 truth in lending forms cover the payments if the borrower wants to keep payment low and let the loan amount increase or wants to pay enough to fully amortize
the loan, that is why the figures would be different. I have had many borrowers who select to take the lower payment, but most dont.

Reply by PAW_Fl on 2/1/06 11:46am
Msg #92987

Re: Msg #71045 is on this topic

I do packages all the time with two or more TILs. The TILs are usually related to the GFE the broker or LO works up. Quite often, the program that is worked up is not the final one that is reflected in the Note. And the "final" TIL should reflect the structure of the Note and addendum. Quite often, you will see three or four and possibly five addendum to a Note that 'modifies' the terms, lowers the payments, changes the interest and/or payment change dates. So one must read ALL the addendum along with the Note before arriving at any final conclusion on the program, terms and conditions.

Many of the variable options are fixed/adjustable rates, interest-only periods, 40/30 schedules (loan amortized as if a 40 year term, but actual term is 30 years, leaving a balloon at the end), negatively amortized loans with a 115% principal expansion cap, etc.

If the loan is an ARM (or any adjustable features are included in the Note), the TIL becomes a "best guess" scenario when trying to figure payments after the first rate change. This of course, makes the finance charge a guess too, which means the total amount paid and the APR becomes guesses.

IMO, the TIL has got to be the most confusing document in a loan package. Many borrowers certainly don't understand it, too many loan officers, brokers, processors, title agents and closers don't understand it either. It works great for the simple fixed rate, fixed term loan programs, but some of the more complex programs some lenders offer make the TIL a real travesty rather than truth.

Reply by DellaCa on 2/1/06 12:47pm
Msg #93019

Re: So Paul

confusing is Right to me. How do you tell the borrowers in simple terms why there are 2 or more and which one is their true or close one for them? Do you go ahead and have them sign both or all?I assumed both had to be signed , I thought the one with the latest date was the one that was correct but it looks as if that is not right.
Thanks Paul

Reply by PAW_Fl on 2/1/06 4:38pm
Msg #93099

Re: So Paul

Yes, all the GFE's, TIL's, 1003's, must be signed. Often the broker or LO never gets these back from the borrower (usually because the borrower never gets them in time to sign and return them).

Reply by ReneeK_MI on 2/2/06 5:05am
Msg #93224

Several reasons for multiple TILS

Whenever the loan terms (rate, length of loan, amount, product) are changed DURING the process of getting the loan approved, a revised Preliminary TIL is supposed to be disclosed to borrower. Literally this means if an U/W is working on a loan, tweaking this and that to get a 'fit', a new Prelim TIL is generated (assumably to be mailed). Prelim TILS can be tough to distinguish from a Final TIL (usually, Prelims have asterisks next to the numbers).

Ok - 2nd source is when there is a Mtg. Broker. He will also have his own Prelim TILS.

THEN - loan docs are generated w/ a Final TIL, but the HUD is usually revised multiple times after rest of docs are done. SOME of the figures on the HUD are tied to the figures on the TIL - each HUD revision is done by t/c, sent to Lender for approval, usually sent BACK with it's relative new TIL.

So - now there are 27 TILS on the planet, relative to this loan. How many end up being sent for signing NOW depends on how savy each of those cooks were in stirring the pot, and how many Prelims everyone decides they want signed. ONE FINAL TIL matches the end results (well, you assume ...)

Being that the TIL is a disclosure that does not contain anything pertinent that you can't confirm elsewhere, other than the APR - which is merely a comparison tool and a rather moot point by the time you close - there should be no reason for a closing to be abandoned over multiple TILS. If you ever want to know which one is THE final/accurate one - a call to the lender to confirm final APR would do it (then pull out the TIL w/matching APR to present to (B) as final). Or you can calculate it yourself - but that's too many more paragraphs and really not our responsibility.