When calculating points and fees §1026.32(b)(1)(i)(E and F) allow the creditor to exclude from the calculation up to two bona fide discount points under §1026.32(b)(1)(i)(E), or up to one bona fide discount point under §1026.32(b)(1)(i)(F), paid by the consumer in connection with the transaction, if certain conditions are met. When a loan is secured by personal property, such as a mobile home, the condition is that the interest rate without any discount does not exceed the average rate for a loan insured under Title I of the National Housing Act (12 U.S.C. 1702 et seq.) by more than one percentage point under §1026.32(b)(1)(i)(E), or by more than two discount points under §1026.32(b)(1)(i)(F).
Deducting one or two bona fide discount points is a huge advantage. Obviously there is some complexity in the calculation described above, and there is also a major problem. The average rate for a loan insured under Title I of the National Housing Act is not available. Apparently the Consumer Financial Protection Bureau (CFPB) has tried, with no success, to get the Department of Housing and Urban Development to publish the rate. The CFPB has suggested various interim steps including reliance on market rates, and even assuming that market rates are indicative of market rates.
With the current situation it appears that you really can’t be wrong, but at the same time there is no assurance that you are right. The suggested interim steps are not contained in Regulation Z or in the Official Interpretations. The suggestions have been made in phone calls from the CFPB in response to questions from several bankers. The CFPB needs to insert some certainty into this matter.
The revisions to §1026.32 are effective on January 10, 2014.