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Electronic Code of Federal Regulations
12 CFR--PART 1026
View Printed Federal Register page 78 FR 6583 in PDF format.
Amendment(s) published January 30, 2013, in 78 FR 6583
Effective Dates: January 10, 2014
3. Section 1026.32 is amended by:
A. Revising the section heading;
B. Revising paragraph (b)(1);
C. Removing and reserving paragraph (b)(2);
D. Adding paragraph (b)(3) through (6)
The additions and revisions read as follows:
§1026.32 Requirements for high-cost mortgages.
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(b)Definitions.For purposes of this subpart, the following definitions apply:
(1) In connection with a closed-end credit transaction,points and feesmeans the following fees or charges that are known at or before consummation:
(i) All items included in the finance charge under §1026.4(a) and (b), except that the following items are excluded:
(A) Interest or the time-price differential;
(B) Any premium or other charge imposed in connection with any Federal or State agency program for any guaranty or insurance that protects the creditor against the consumer's default or other credit loss;
(C) For any guaranty or insurance that protects the creditor against the consumer's default or other credit loss and that is not in connection with any Federal or State agency program:
(1) If the premium or other charge is payable after consummation, the entire amount of such premium or other charge; or
(2) If the premium or other charge is payable at or before consummation, the portion of any such premium or other charge that is not in excess of the amount payable under policies in effect at the time of origination under section 203(c)(2)(A) of the National Housing Act (12 U.S.C. 1709(c)(2)(A)), provided that the premium or charge is required to be refundable on a pro rata basis and the refund is automatically issued upon notification of the satisfaction of the underlying mortgage loan;
(D) Any bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either, unless the charge is required to be included in points and fees under paragraph (b)(1)(i)(C), (iii), or (iv) of this section;
(E) Up to two bona fide discount points paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed:
(1) The average prime offer rate, as defined in §1026.35(a)(2), by more than one percentage point; or
(2) For purposes of paragraph (a)(1)(ii) of this section, for transactions that are secured by personal property, the average rate for a loan insured under Title I of the National Housing Act (12 U.S.C. 1702et seq.) by more than one percentage point; and
(F) If no discount points have been excluded under paragraph (b)(1)(i)(E) of this section, then up to one bona fide discount point paid by the consumer in connection with the transaction, if the interest rate without any discount does not exceed:
(1) The average prime offer rate, as defined in §1026.35(a)(2), by more than two percentage points; or
(2) For purposes of paragraph (a)(1)(ii) of this section, for transactions that are secured by personal property, the average rate for a loan insured under Title I of the National Housing Act (12 U.S.C. 1702et seq.) by more than two percentage points;
(ii) All compensation paid directly or indirectly by a consumer or creditor to a loan originator, as defined in §1026.36(a)(1), that can be attributed to that transaction at the time the interest rate is set;
(iii) All items listed in §1026.4(c)(7) (other than amounts held for future payment of taxes), unless:
(A) The charge is reasonable;
(B) The creditor receives no direct or indirect compensation in connection with the charge; and
(C) The charge is not paid to an affiliate of the creditor;
(iv) Premiums or other charges payable at or before consummation for any credit life, credit disability, credit unemployment, or credit property insurance, or any other life, accident, health, or loss-of-income insurance for which the creditor is a beneficiary, or any payments directly or indirectly for any debt cancellation or suspension agreement or contract;
(v) The maximum prepayment penalty, as defined in paragraph (b)(6)(i) of this section, that may be charged or collected under the terms of the mortgage loan; and
(vi) The total prepayment penalty, as defined in paragraph (b)(6)(i) of this section, incurred by the consumer if the consumer refinances the existing mortgage loan with the current holder of the existing loan, a servicer acting on behalf of the current holder, or an affiliate of either.
(3)Bona fide discount point—(i)Closed-end credit.The termbona fide discount pointmeans an amount equal to 1 percent of the loan amount paid by the consumer that reduces the interest rate or time-price differential applicable to the transaction based on a calculation that is consistent with established industry practices for determining the amount of reduction in the interest rate or time-price differential appropriate for the amount of discount points paid by the consumer.
(4)Total loan amount—(i)Closed-end credit.The total loan amount for a closed-end credit transaction is calculated by taking the amount financed, as determined according to §1026.18(b), and deducting any cost listed in §1026.32(b)(1)(iii), (iv), or (vi) that is both included as points and fees under §1026.32(b)(1) and financed by the creditor.
(5)Affiliatemeans any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841et seq.).
(6)Prepayment penalty—(i)Closed-end credit transactions.For a closed-end credit transaction,prepayment penaltymeans a charge imposed for paying all or part of the transaction's principal before the date on which the principal is due, other than a waived, bona fide third-party charge that the creditor imposes if the consumer prepays all of the transaction's principal sooner than 36 months after consummation, provided, however, that interest charged consistent with the monthly interest accrual amortization method is not a prepayment penalty for extensions of credit insured by the Federal Housing Administration that are consummated before January 21, 2015.
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