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Banking Interpretations

NYSBL 6-l and
General Regulations of the Banking Board Part 41

From: Alan Weinberg/legal/NYSBD

To [ ]

06/13/2006 04:12 PM

cc Steven.Barras@banking.state.ny.us,
Sara.Kelsey@banking.state. ny.us,
Barbara.Kent@banking.state.ny.us

Subject Re: NY Total Loan Amount Calculation

This is in reply to your e-mail and will clarify my response to the inquiry of [ ] of your organization.

You raise what are, in effect two questions. The first is whether a seller/lender lump sum credit in favor of the borrower can be used to offset "points and fees" for purposes of the "total loan amount " calculation under the Part 41 regulations related to High Cost Home Loans. We agree with you that the answer is no. Such a lump sum credit can not be used to reduce "points and fees" and thereby increase the "total loan amount ." Whether, and the extent to which, such a credit relates to the components of the "points and fees" calculation is not capable of being determined. Therefore, actual points and fees can not be considered not to have been charged simply because there is a general lump sum credit.

Your second question is whether an itemized credit in favor of the borrower can be used to offset "points and fees" for purposes of the "total loan amount " calculation under the Part 41 regulations related to High Cost Home Loans. ^ We agree with you that the answer is yes. In our view, an itemized credit can be used to reduce "points and fees" and, to the extent that such points and fees are financed in the principal amount, the itemized credit can increase the "total loan amount ." We believe that, to the extent that a credit in favor of the borrower is clearly applied against a component of the "points and fees" calculation, those points and fees in question should not be considered to be charged to the borrower.

As to my response to the inquiry of [ ] of your organization, I wish to clarify that the subject matter of my response there involved not "points and fees" generally, but rather "points and fees" stemming from compensation paid directly or indirectly to a mortgage broker. As I had indicated, the New York and federal rules differ on this question related to what are commonly referred to as "yield spread premiums." Under the New York rule, compensation paid directly or indirectly to a mortgage broker (for example, points and fees paid by a seller, lender or other third party, which are commonly referred to as "yield spread premiums") are included in the "points and fees" calculation of New York High Cost Home Loans. Whereas, under the federal rule, as we understand it, compensation paid indirectly to a mortgage broker (for example, points and fees paid by a seller, lender or other third party, which are commonly referred to as "yield spread premiums") are not included in the federal "points and fees" calculation under Regulation Z and the Commentary thereto. This is further explained by the Department in an interpretive letter dated September 3, 2004, which I cited in my response to [ ] and which is posted on our website and can be found at: http://www.banking.state.ny.us/legal/lo040903.htm.

Please let me know if you have additional questions related to any of these matters.

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