April 24, 2018 at 3:20 pm #41680TTrumbleMember
As much as I hate to say it, I think some of our counselors don’t understand how the buy down program works with regard to how the Home Owner Equity Protection Act (HOEPA) affects it.
I asked about Connecticut because they apparently have a statute that creates an actual five point limit on buyer’s funds to buy down the loan.
Other than that, I suspect we’ve got a couple of folks who don’t quite get the details of HOEPA. The confusion no doubt lies in how the seven point limit breaks down. HOEPA states that the cost of a loan cannot exceed five percent of the loan amount (five points), PLUS two “bona fide” discount points. Five plus two equals seven. Simple enough.
The actual application of it does get a little more complicated as I have written recently, and I’m hesitant to post it since it would cause more confusion than it would clarify things. As I’m sure you are all aware, certain costs are subtracted from the buydown funds, the amount of which is determined by the methods outlined by BOA and Citi that have been posted here before. For now though, let’s stick with the specific question at hand about where this five point figure is coming from.
In short, the five-plus-two HOEPA rule can be the only place all this confusion about the buy down is coming from. Bottom line, a maximum seven points from the buyer is still the accurate figure.
Online Operations, NACA
April 24, 2018 at 3:48 pm #41684GlennyPMember
- This reply was modified 2 years, 7 months ago by TTrumble.
What are the bona fide discount points? How do you get them?
Does anyone have the post of the costs that are subtracted from the buy down funds?April 25, 2018 at 10:20 am #41691Searching4HomesMember
I’m glad you clarified, but I’m really disappointed that my MC (also the office manager) did not try to seek any type or clarification before my loan closed. I asked could he look into it and he flat out gave me half responses. I’m attaching our conversation again for your reference. Thankfully it wasn’t a huge impact to my mortgage payment; however, it is about $5,500 more in interest payments I didn’t have to pay. My only ask of you is to pass that information to the Raleigh office so this kind of mistake won’t occur again.
At the end of the day I’m grateful I have a home and still thank NACA for allowing me to make a purchase through their program.
Conversation on IR
E-mail from email@example.com on 03/07
NACA COC: Lowest rate member can buy down to is 2.875% due to HOEPA limitations
E-mail to CC on 03/07
I’m a little concerned and I hope I can gain some clarification from you. This CIC states we can’t get the rate of 2.75% and must take a rate of 2.875% due to HOEPA. I thought the most we could buy down from BOA was 5.5 points? When did it drop to only 5 points for BOA?
Response from CC on 03/08
I would be more than happy to assist you with your question but not allowed due to not being a licensed Loan Officer. I have copied your Mortgage Counselor xxxxx xxxxxxxxxx on this email to assist you with your question.
E-mail to MC on 03/09
Good morning xxxxx,
I’m following up on our question on the IR change. Do you know why BOA advised the lowest we would buy down the rate was 5 points and not 5.5 points? Has HOEPA changed recently to where the max points is now 5?
Response from MC on 03/09
It’s what Bank of America gave us.
E-mail to MC on 03/09
Do you have a contact at Bank of America that I speak to?
I would like to understand why the points buy down decreased from 5.5 points to 5 points. 2.875% is a still a good interest rate, but no one has explained to me why there was a change beside the initial e-mail that it was a HOEPA violation. Specifically, how is it a HOEPA violation? What criteria is being used to say 5.5 points is a HOEPA violation
E-mail from MC on 03/09
There is not one to speak to at BofA
Once again @TTrumble, thank you for the follow up.April 25, 2018 at 10:54 am #41692homesweetbostonMember
@Searching4Homes, I’m terribly sorry that you fell through the cracks in this confusion. I’m glad that your relative will have clearer information from the start.
@ttrumble, can I echo the sentiment here? There is widespread confusion about how this buydown works and what the max allowed buydown points are, both on this forum and in encounters with MCs.
I had this same confusion with the Boston office (aka the national headquarters): for the brief moment that it seemed that my loan would be through BofA (long story — turns out it’s with Citi), I also ran into this issue. I was given two conflicting answers, neither of which was the actual max buydown amount according to the Lender Grant formula frequently cited here (BofA = 7% minus 3000). Finally, with much exertion on my part, and several forwarded forum posts, my MC was able to track down an official email that confirmed the formula.
Unlike Searching4Homes’s experience, my MC was diligent and followed up until conflicting information got resolved. This issue really should be brought up at one of the monthly phone meetings, or in some other high-profile format so that MCs can get on the same page quickly. Since NACA pushes the buydown option, it really should be clarified.
It’s all the more so the case with flattening wages, rising interest rates, burdensome student loan obligations, and soaring home prices in urban areas: there’s a growing demographic of non-targeted members who simply wouldn’t be able to buy a house with an affordable monthly payment without NACA’s help. For these people especially, the NACA program will become especially attractive in the coming years.April 18, 2019 at 10:31 pm #48327citymouseMember
I am now dealing with this same issue and received a very abrupt reply from my mortgage counselor that it’s just what it is?! @ttrumble why isn’t there some uniformity or training on this point. It is literally costing us thousands of dollars!
Anyone else have this happen recently?
Is 5% now the max buydown period? Please help we are already onto bank submission.
NicoleOctober 5, 2019 at 6:23 pm #60975
@citymouse, did you resolve this? I am being told the same thing, and I’m not sure how to remedy the situation.October 5, 2019 at 6:36 pm #60976
Are you a priority member? Priority members and non priority members have different rules and priority members under 80% of the MSA have different rules. The federal guidelines just tell you the absolute max. Naca assigns rules based on your situation in order to both help out those in need and to keep others from gaming the system.
With that said there is no limit federal or naca that prohibits the total buy down beyond 7 points all the way to a 0.125% interest rate. There may be state regulations you have to abide by but in most cases getting down below 1% interest requires either an approved first time homebuyer grant on top of your own buy down funds or seller contributions or both.October 7, 2019 at 10:34 pm #60998
Thank you for your response @Nelsont. That’s my exact issue. I am a priority member between 80-100%. I should individually be able to contribute a max of 7%. My seller should be able to contribute a max of 10%. I am being told that the total from ANY source that can be contributed is 5.5%. With my seller contributing being 4%, they’re telling me that my individual maximum is 1.5%. Per Tim‘s response above that’s not accurate, and there is a misunderstanding on my MCs part. I do not live in Connecticut and I am not receiving a grant.October 7, 2019 at 11:05 pm #61001
That does sound inaccurate unless the rules changed. His response is over a year old and a lot has changed in the 2019 calendar year.October 8, 2019 at 10:47 am #61006truque94Member
Tim has recently stated that both Protity and Non-Priority members can contribute up to 7% minus $3,000 origination fee and the seller also can contribute up to 10%October 8, 2019 at 2:17 pm #61020
Turns out my MC was able to submit today with the expected contribution of my 7 max plus the sellers 4 for the expected rate of 0.75 down from 3.125. I will update if anything changes in case anyone else runs into this snag, but for now it looks like it resolved itself – Amen!October 11, 2019 at 5:33 pm #61311pratikMember
Any clarity of how much buy-down a non-priority member can do? I have been advised by my local branch manager, very prominent and active in NACA as you know, that anyone above 80% of median income is limited to 5 points in buy down. Did he get it the other way around? (that <80% median income members are limited to 5 points buydown, after 1% lowering of the interest rate?) Or has any rules changed recently?
PratikOctober 11, 2019 at 5:58 pm #61312
Greater than 80% income gives you more restrictions. Greater than 100% gives you more restrictions still.
Less than 80% you can buy anywhere in the MSA and buy down the most allowed by naca/hoepa.October 12, 2019 at 7:20 pm #61321ki_dreamsMember
@ttrumble, based on your post, if I am in Connecticut, I cannot buy down more than 5 points, correct?November 3, 2019 at 6:14 pm #61909frankysmomMember
Agh! Looks like I have been calculating the max buydown all wrong.
Please help me out here. Is this correct?
On a loan of 540,000 with a rehab of 100,000 And contributing 40,000 to buydown…
7 points = $27,000
Max buyer buy down = 7 points – ($3,000) – (3% rehab escrow aka $3000)
Therefore 21,000 is the actual maximum buy down. (Which translates to 3 points??? OR is this figure just for “overage” calculation below and I am still permitted to buydown 27k worth of points)
40,000-21,000 = 19,000 is the “overage” and the amount lender will match? And NOT the full 7 points?
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