MRG Document Technologies (MRG) has begun offering higher-price loan tests, which the company says enable lenders to comply with the Federal Reserve Board's pending higher-priced mortgage loan rule that takes effect Oct. 1.
The rule adds four protections for the category of higher-priced mortgage loans secured by consumers' primary residences. For loans in this category, these protections prohibit lenders from extending credit without regard to a consumer's ability to repay from sources other than the collateral itself; require lenders to verify income and assets they rely upon to determine repayment ability; prohibit prepayment penalties except under certain conditions; and require lenders to establish escrow accounts for taxes and insurance, but permit lenders to allow borrowers to cancel escrows 12 months after loan consummation effective after April 1, 2010.
MRG's higher-priced mortgage loan tests provide compliance testing of individual loan data to make sure they comply with predatory lending restrictions. Higher-priced mortgage loans are closed-end loans secured by a consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction by at least 1.5 percentage points for first mortgages or 3.5 percentage points for subordinate liens.
"Since the average prime rate changes on a weekly basis, this is a process that needs continuous attention and maintenance to remain accurate," says Laura LaRaia, an attorney and director of customer service at MRG. "If lenders are unable to tackle the issue by themselves, third-party technology providers such as MRG can help them maintain compliance."
SOURCE: MRG Document Technologies