Posted by Raj Sahu on 3/10/13 3:35pm
Msg #460408

Why is loan amount is different on HUD and Truth in Lending?

Couple of questions for the expert and experienced notaries :
I notice in refi packages that the Loan amount is different on HUD -1 and different amount on Federal TIL disclosure statement. Why is this so?
While NOTE typically reflects the same number as the HUD-1, the TIL does not.
Also I want to ask why is the APR substantially higher than the initial rate of interest ( I know that APR is calculated taking into consideration the closing costs of the loan) But still...
Another question is why does the Note NOT give the ACTUAL MONTHLY PAYMENT which typically includes (apart from P & I payment) ---> Est. taxes, Escrow and Mortgage insurance.
If the borrower wants to know the TOTAL Number he/she/they will be paying each month, should a signing agent direct/ steer the borrower to federal Truth in Lending Doc which states the TOTAL MONTHLY PAYMENT?

I thank you guys in advance for providing excellent answers. Indeed this forum is helping me tremendously in procuring answers/ solutions to exceedingly important questions/ situations.
I really love ya guys! Thank you very much for sharing your PRICELESS knowledge and precious counsel. With your guidance, counsel, assistance, encouragement, edification, knowledge and experience I have not a shadow of doubt that one fine day I too will be able to mentor and guide newer notaries here, that they may also enrich their knowledge and have a highly rewarding career

Reply by Art_MD on 3/10/13 3:49pm
Msg #460412

Re: partial answers

The note is only agreement to pay back money you borrow. Nothing to do with taxes etc.
Actual monthly payment is usually broken down on a seperate page. It most often has a couple of months worth of payment coupons.

Quick way to see how interest rate and apr differ.

NOTE: numbers are illustration purpose only.

100,000 loan at 4% (amount on note) payment 300/month
taxes, escrow, closing =5,000.
So, actual money received to payoff existing loan is 95,000.
Back calculate is done...
What interest rate on 95,000 yields a payment of 300/month? Answer is APR

Reply by Raj Sahu on 3/10/13 5:16pm
Msg #460417

Re: partial answers

Thank you --very well explained!

Reply by sigtogo/OR on 3/10/13 6:06pm
Msg #460426

not exactly, taxes and escrow are NOT part of APR n/m

Reply by sigtogo/OR on 3/10/13 4:50pm
Msg #460416

TIL has amount financed, not the loan amount found on note

please do a search of the net for TIL/APR explantions. you will find some great resourses. stick with results that are provided by HUD, government, or national lender. individual explations will likely not cover all you might want to know or do so as efficiently and clearly. well, ok, gov stuff isn't alway so clear but you might as well go to the source for your answers. MO of course!
I will try forwarding a Morgan Stanly doc I have that has some good info.
good luck!

Reply by Doris_CO on 3/10/13 10:04pm
Msg #460466

Re: TIL has amount financed, not the loan amount found on note

Most loan packages have the page "Itemization of Amount Financed", which usually follows the TIL in the package. If you go over the numbers, you'll probably see some figures for Prepaid Finance Charge. That amount is what is deducted from the loan amount, because the borrower doesn't pay interest on interest. The loan amount, less the prepaid interest, is what is subject to the interest charge and listed on the TIL in that top portion as Amount Financed.

As to your other question, the Loan Agreement/Note only lists the principle and interest payment because, on a fixed rate loan, they won't change. The taxes and insurance amounts can change from year to year, which changes the total payment from year to year.

Reply by sigtogo/OR on 3/11/13 6:26pm
Msg #460620

whoa, sorry Doris, but this is a bit off the mark

" That amount is what is deducted from the loan amount, because the borrower doesn't pay interest on interest. The loan amount, less the prepaid interest, is what is subject to the interest charge and listed on the TIL in that top portion as Amount Financed."

This is not correct on several counts, Doris. Sorry to call you out but I hope this is not what you tell borrowers because it just isn't true. please read link Rene posted which includes the following.

from the net: The Annual Percentage Rate (APR) is the cost of your credit expressed as an annual rate. Because you may be paying loan discount ‘points’ and other ‘prepaid’ finance charges at closing, the APR disclosed is often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs.

Reply by Melissa Stroh on 3/11/13 9:59am
Msg #460502

"I notice in refi packages that the Loan amount is different on HUD -1 and different amount on Federal TIL disclosure statement. Why is this so?"

The amount financed is lower than the loan amount because the lender takes out the closing costs - their fees, 3rd party fees and any amounts to set up escrow - none of these fees are financed.

Reply by ReneeK_MI on 3/11/13 2:26pm
Msg #460564

Here's a fairly easy on the brain TIL explanation

http://www.alliemae.org/truthinlending.html

For payment breakdown & total, use the First Payment Letter. The Note is only ever going to show the P&I because the Note only deals with the terms of payment for the money actually being borrowed.