Ohio Predatory Lending Act

The State of Ohio has made some significant changes to the high cost test set forth in the Ohio Predatory Lending Act (Ohio Revised Code Sections 1349.25 to 1349.37) that become effective for all loans with a closing date on or after January 1, 2007.

Currently, the Ohio high cost test is identical to the federal Section 32 test.  The changes that go into effect for loans closing on or after 1/1/2007 are as follows: 

1.   Coverage: The revised OH high cost test will now apply to open-end loans (Loan Type = E); currently, open-end loans are excluded from coverage. 

2.   Points and Fees: The definition of points and fees has been revised.  

a.   Yield spread premiums or other premiums paid to mortgage brokers other than by the borrower are now included in the definition of “Other Mortgage Broker Compensation”; provided, however, that up to one point of such indirect compensation paid to a mortgage broker may be excluded from points and fees.

b.   Fees paid to FHA and VA are excluded from points and fees.

Given the foregoing changes, here is how Points and Fees will be calculated:  

	Prepaid Finance Charge - the total amount of prepaid finance charges
-	Prepaid Interest - deducted from prepaid finance charge
+	Other Mortgage Broker Compensation - all compensation paid to broker regardless of the source of payments, i.e., including yield spread premiums and other non-borrower paid compensation to broker
+	Other Charges Paid to Creditor/Affiliate - the total amount of all Regulation Z Section 226.4(c)(7) charges not included as a part of the Prepaid Finance Charge if paid to the creditor or creditor affiliate
+	Optional Credit Insurance/Related Products Paid At or Before Closing - optional credit life/accident/health/loss of income/debt cancellation coverage costs, regardless of how named or paid (in cash or financed) and regardless if a single premium or initial payment
-	Other Excludable Charges - the total of (a) fees paid to FHA or VA; and (b) up to one percentage point (1%) of indirect mortgage broker compensation (i.e., YSP or other premium paid to the mortgage broker other than by the borrower).
+/-	Creditor Requested Adjustments - the total amount of all customer requested overrides

3.   Total Loan Amount: The definition of "Total Loan Amount" under the points and fees test has been revised.  "Total Loan Amount" now means the principal amount of the loan (and for open-end loans, the credit line available) minus points and fees financed. 

	Original Principal Balance/Credit Line Available
-	Total Points and Fees Financed
+/-	Creditor Requested Adjustments

4.   Points and Fees Threshold: The Points and Fees threshold has also been changed to the following: 

      If the Total Loan Amount is $25,000 or more, the threshold is 5%
      If the Total Loan Amount is less than $25,000, the threshold is 8% 

Please contact the DocMagic Legal/Compliance Department if you have any questions regarding these changes.