North Carolina Bona Fide Discount Points Assessment

February 5, 2020rashtonBulletin, News

Overview

In the state of North Carolina, borrowers may be charged bona fide discount points for the purpose of reducing their interest rate. For Owner Occupied Loans with a balance of $300,000 or less, up to 2.25% (Agency products) or 0.25% (Non-agency products) may be charged as Discount Points under the North Carolina Max Fee Rule if the bona fide assessment is met.

Determining Maximum Discount Points

North Carolina does not use the Average Prime Offer Rate (APOR) like the QM Test does. They use the Fannie Mae Average Rate.

The Fannie Mae Average Rate can be accessed on the following website:

https://www.fanniemae.com/singlefamily/historical-daily-required-net-yields

In this example the Fannie Mae Rate is used for bona fide discount point assessment.

3.34 + 1 = 4.34

If the Starting Adjusted Rate does not exceed 4.34, you can exclude 2.00 points, and have a maximum of 2.25% in Discount Points charged.

3.34 + 2 = 5.34

If the Starting Adjusted Rate does not exceed 5.34, you can exclude 1.00 point, and have a maximum of 1.25% in Discount Points charged.

If the Starting Adjusted Rate is greater than the comparable rate +2.00, no points are eligible for exclusion, and the maximum Discount Points are 0.25%.

Starting Adjusted Rate is the Rate closest to PAR.

Compliance Fails

Locks with non-bona fide Discount Points will encounter Compliance Fails in BrokerIQ, and the interest rate will need to be raised in order to reduce the Discount Points to proceed. If a higher rate with lower Discount Points is not available, Brokers should contact their Account Executive to review.