Bona Fide Discount Point Assessment Tool

View the "Working with HOEPA and Ability-to-Repay Regulations" White Paper

The Bona Fide Discount Point Assessment tool enables lenders to document whether or not Discount Points can be excluded from Sec 32 Points and Fees by meeting the standards used to determine if the discount points are bona fide.

The following information is displayed in the Bona Fide Discount Point Assessment tool:

  • Note Rate and Associated Discount Points being paid by the consumer

  • Starting Adjusted Rate and Discount Points associated with the starting adjusted rate

  • Undiscounted Rate

  • Average Prime Offer Rate

  • Rate Reduction Basis used to document that the meaningful reductions in rate was calculated in a manner consistent with established industry practices

The displayed information is used to determine the amount of discount points that can be deemed Bona Fide based on the:

  • Amount of discount points that can be excluded based on the difference between the started adjusted rate and the APOR

  • Amount of discount points that can be excluded based on a meaningful reduction in rate

  • Amount of discount points that can be excluded based on points that exceed the points associated with the starting adjusted rate

Based on the results of all three assessments listed above, a final value of discount points eligible for Bona Fide consideration is displayed.

Using the Bona Fide Discount Point Assessment Tool

Enter information in the editable fields of the Bona Fide Discount Point Assessment tool using the instructions below. The calculated fields in the tool are automatically populated using the information you enter.

To review the field definitions for the Quick Entry - Bona Fide Discount Point Assessment fields, refer to Appendix A in the Working with HOEPA and Ability-to-Repay Regulations white paper.

To Use the Tool:

  1. In the Points and Fees section on the ATR/QM Management input form (Qualification tab), click the Discount Points button to open the tool.

  2. In the Starting Adjusted Rate row:

    • Starting Adjusted Rate (field ID NEWHUD.X1720) - Enter the interest rate from which the mortgage's interest rate will be discounted.

    • Starting Adjusted Discount Points % (field ID NEWHUD.X1721) - Enter the charge paid by the borrower (expressed as a percentage of the loan plus any flat charge) to obtain a lower interest rate. Any discount points associated with the Starting Adjusted Rate are required to be included in Reg Z Total Points and Fees for HOEPA and ATR/QM.

    • Starting Adjusted Discount Points $ (field ID NEWHUD.X1722) - Enter the charge paid by the borrower (expressed as a flat charge) to obtain a lower interest rate. Any discount points associated with the Starting Adjusted Rate are required to be included in Reg Z total Points and Fees for HOEPA and ATR/QM.

  3. In the Rate Reduction Basis row:

    • Rate Reduction Basis Points (field ID QM.X365) - Enter the amount of basis points in which the final note rate is reduced from the starting adjusted rate.

    • Rate Reduction Discount Points % (field ID QM.X366) - Enter an amount equal to a percent of the loan amount to compare the number of discount points being charged against the amount of basis points the note rate is being reduced by. For example enter 1% if the value in <rate reduction basis points %> is 0.250 to reflect a requirement that the note rate be reduced by 0.25% for 1% in discount points being charged.

  4. When finished, click Close.