All Forum Posts by: Don Freshen

Kevin, if length of post equates to big deal then maybe so.  In that long post I didn't happen to mention that this is not stopping me from closing.  I'm just interested in how something like this happens on this scale so I was fishing for two things:

1. Industry attitude about the TOP.

2. Someone who DOES have a good answer for why the CD algorithm calculates it the way it does.

And I know all the Loan Calcs are junk. I was just focusing on the TOP because it's the easiest target for me and will essentially answer all the questions I care about. Your reply is appreciated because it's another example of what appears to be the general industry attitude, and I can understand why it's that way, but from the outside it appears that may be part of the problem. Because if enough people hassled lenders about these numbers they'd be more motivated to create enough pushback on the CFPB or HUD or whoever to make alterations. And if not your peers, who else would have the motivation and influence?

I understand there is guidance on what can and cannot be included in Loan Amount for the TOP Calc.  If anyone has more insight into the hows and whys of it, or why its been left to dangle uselessly wrong (if different than "nobody cares"), I'd appreciate it.  I got directed to the CFPB Ombudsman office and I'm waiting for their follow up.  If they actually reply and tell me anything useful I will share it.

I have not done a mortgage or refi in a decade and am currently in process with a reputable credit union.  They use a third party for processing and servicing and my mortgage consultant got me a great rate as they were shooting up so I really want to follow through.  The problem is with my Closing Disclosure.  All the numbers are correct until I get to the page 5 Loan Calculations.  My lender was able to roll all my costs into the new loan so I am bringing no cash to closing.

The way the Total of Payments is calculating is:

Loan Amount + Total Interest paid over loan term (15yr) + prepaid interest + Loan Costs

All this seems appropriate if I pay all Loan Costs at closing.  But ALL my costs are rolled in so the Loan Amount includes all the Loan Costs already, so the Total of Payments is double counting the costs.  It should be using the payoff of my existing loan in place of Loan Amount OR deduct any loan costs that are included in the new loan principal, which is part of the new Loan Amount.

After pushing them to try and correct this their compliance refuses to change this number, make an addendum note or allow me to mark through it and put in a more correct number (payment X term mths).  I've researched this and found that the CFPB requires this number to be understated by no more than $100 but has no limit on overstatement.  And it sort of makes sense that they don't want borrowers to be told their total outlay is lower than it actually is but not care as much about overstating from a false advertising perspective.  But it's still odd.

I believe they are being honest in telling me that they are calculating it correctly, because code dictates that (I think).  So if this is true (the TOP is calculated as required), and knowing the purpose of the CD is to protect the borrower, and thousands of loans are closed every day.  How can such a simple math concept not be invoked to make the Total of Payments more accurate?

He tried to explain that this number was not meant to be a "total out-of-pocket cost" number, it was just for "reference".  I logically understand that, I'm an accountant.  But this document is not just for numbers people, it's for everyone.  And the description is simple and clear on what it is supposed to be.  So how could they let it be so wrong?  This would mean nearly every CD produced is incorrect, unless all the costs are paid at closing.  Is this really happening?

OR - is mine definitely NOT correct?  Are loan costs rolled in supposed to be deducted from the loan amount for the TOP and this particular broker's system doesn't calculate it correctly or they are making an entry error of some kind?

To date, I cannot get the CFPB to give me any additional info other than what's on their website, and nothing I've found specifically addresses what I'm talking about in detail.  On Bankersonline I found a couple posts, one of which a broker asking the group how he's supposed to explain the TOP to clients when he knows it's wrong, which is evidence this is not uncommon.  But that's all I've found.

Anyone that has more detailed knowledge of how and why this number is calculated, and more specifically whether or not there is anything specific about loan costs being rolled into the Loan Amount and how that's addressed I'd appreciate your feedback. The other numbers in this section are also wrong (Finance Charge, Amount Financed, APR, TIP) by varying amounts. Is there a good answer?

Thanks

Don