Anti Steering Safe Harbor Requirements - fcmkc.com

1 anti Steering safe Harbor Requirements The Requirements : The anti Steering Disclosure is required for any loan that: Your institution is not funding the loan (Brokered loan). Lender Paid Compensation (LPO). Therefore, FCM does not require anti Steering disclosure on loans that: Your institution is funding the loan (Correspondent). Borrower Paid Compensation (BPO). The following disclosure is an example of the minimum standards required of the anti Steering safe Harbor disclosure. It is highly recommended to use the FCM form, but not required, if you are able to demonstrate similar elements including the loan comparison chart.

2 The Disclosure: The anti Steering Disclosure is used to meet the safe Harbor Requirements set forth in (e) (2). As evidence of the provisions being met, FCM will require an anti Steering disclosure (ASD) signed by all borrowers listed on the Note and be presented to the borrower(s) at the time the Loan Originator has sufficient information to complete the disclosure, but no later than one business day prior to closing. FCM will not accept loans without a properly executed anti Steering disclosure. The safe Harbor is met if the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and the loan options presented to the consumer include: The loan with the lowest interest rate for which the consumer qualifies.

3 The loan with the lowest interest rate for which the consumer qualifies for a loan without negative amortization, a prepayment penalty, interest only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation; or, in the case of a reverse mortgage, a loan without a prepayment penalty, or shared equity or shared appreciation; and The loan with the lowest total dollar amount for origination points or fees, and discount points. The loan options must be an accurate reflection of the circumstances at the time of disclosure.

4 To be within the safe Harbor , the loan originator must obtain loan options from a significant number of the creditors with which the originator regularly does business. The loan originator can present fewer than three loans and satisfy the safe Harbor , if the loan(s) presented to the consumer otherwise meet the criteria in the rule (this is unlikely). Revised 12/17/2012 Fed Rule Excerpt: Creditors with which loan originator regularly does business. To qualify for the safe Harbor in (e)(2), the loan originator must obtain and review loan options from a significant number of the creditors with which the loan originator regularly does business.

5 For this purpose, a loan originator regularly does business with a creditor if: i. There is written agreement between the originator and the creditor governing the originator's submission of mortgage loan applications to the creditor; ii. The creditor has extended credit secured by a dwelling to one of more consumers during the current or precious calendar month based on an application submitted by the loan originator; or iii. The creditor has extended credit secured by a dwelling twenty0five or more times during the precious twelve calendar months based on applications submitted by the loan originator.

6 For this purpose, the precious twelve calendar months begin with the calendar month that precedes the month in which the loan originator accepted the consumer's application. If you regularly do not do business with 3 creditors, you can give the borrower options from the creditor(s) with whom you regularly do business, even if it is only one creditor. The loan originator must have, in good faith, presented loan options to the consumer for which they will likely qualify. For each type of transaction, if the originator presents to the consumer more than three loans, the originator must highlight the loans that meet the Requirements specified in the rule.

7 Commentary: Give due significance to the term in which a borrower expresses interest . If a borrower expresses interest in not paying origination or closing costs out of pocket, then to meet requirement A , the lowest interest rate for which the consumer qualifies it may be best to disclose the loan option that is the lowest interest rate for which the consumer qualifies that ALSO has no out of pocket closing costs to the consumer. If a borrower expresses interest in consummating the transaction in 3 weeks' time, it may be best to disclose loan options from the creditors who meet this expressed interest of the borrower.

8 The Instructions: The ASD must be in a grid format and at least 3 loan options must be presented. Bearing in mind options 1 and 2 may be the same, FCM expects at least 2 separate rate and fee structures to be presented to the borrower. Option 1 Must present the lowest interest rate of all the options. Can be the same as option 2, but must be lower than option 3. Option 2 Must present the lowest interest rate without the risky features described above. Note discount points are not a risky feature. Can be the same as option 1. Option 3 Must present the lowest total origination points or fees and discount points of all the options.

9 May not be the same or higher than options 1 and 2. The information contained herein does not represent legal advice. Consult with your institution's regulator or legal counsel. Revised 12/17/12 Type of Transaction (check one) Loan Program Interest Total origination Fixed Rate Description Rate points or fees and Adjustable Rate discounts points Option 1 Loan with the lowest Interest Rate _____% $_____ Option 2 Loan with the lowest Interest Rate without negative amortization, a prepayment penalty, interest only payments, a balloon payment in the first 7 years of the life of the loan, a demand feature, shared equity, or shared appreciation _____% $_____ Option 3 Loan with the lowest total dollar amount for origination points or fees and discount points.

10 _____% $_____ You are applying for a loan with the following terms _____% $_____ Type of Transaction The Loan Originator is required to disclose loan options for each type of transaction (Fixed or Adjustable Rate) for which the borrower has expressed interest. At a minimum, the type of transaction on the most recently disclosed ASD must be the same type of transaction as the loan to be closed. Loan Program Description Use this section to describe the loan program and/or creditor. Interest Rate The interest rate presented to the borrower. For a loan with an interest rate that will be fixed for at least 5 years, the initial interest rate should be disclosed.