Net Tangible Policy and Worksheet-UPDATE

POLICY

Rate will now require for a net tangible benefit test for ALL refinances transactions. "Reasonable tangible net benefit" is determined by a weighing of the relative costs and benefits to the consumer of replacing the consumer's existing loan with the new loan under the totality of the circumstances. If a mortgage loan that refinances an existing mortgage loan with a new loan does not have reasonable, tangible net benefit to the consumer considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the consumer's circumstances, the new refinance transaction will be deemed unreasonable and will be denied. "Terms of both the new and refinanced loans" includes, but shall not be limited to, the monthly payment, the interest rate, the interest rate type (i.e., adjustable or fixed), the loan duration, the mortgage product type, the loan amount, any prepayment penalty and any required insurance. "Cost of the new loan" includes, but shall not be limited to, all paid or financed points and fees, all broker compensation paid, directly or indirectly, in connection with the new loan, any prepayment penalty paid on the consumer's existing loan in connection with the refinancing, and any other closing costs disclosed on the HUD-1 settlement statement for the new loan that were paid or financed by the consumer. "All of the circumstances" may include, but shall not be limited to, the amount of cash received by the consumer in excess of and in relation to the fees and costs of the refinancing, the loan-to-value ration of the new loan compared to the preexisting loan, the necessity of the consumer to comply with a court order, and the amount of time that has lapsed between the new loan and the origination of the pre-existing loan.

 

PROCEDURE

This policy will be effective immediately for ALL refinance transactions. The attached net tangible worksheet must be completed and submitted with the underwriting package for review. If the worksheet is not submitted, underwriting will condition accordingly.

All net tangible worksheets must be reviewed by underwriting to determine if the new refinance transaction is a benefit to the borrower. (Net tangible worksheet cannot be a closing condition and must be reviewed by underwriting.) For Colorado, please see the Colorado Tangible Net Benefit Disclosure Form which is required to be signed by the borrower and loan officers at time of application and at closing.

 

Please feel free to contact your VP of Wholesale Lending or the Underwriting Department for further clarification if needed.

 

Thank you for your continued business!!