TILA RESPA Integrated Disclosure (TRID) Beta is Here!

by Michael Shohoney February 23, 2015 05:08

Over the weekend, Math Corporation launched a BETA-TEST version of eZMath that addresses the TRID requirements from the CFPB that goes into effect on August 1, 2015.  To access this version of the software, log in to your account and select eZMath TRID Beta from the access menu.  Please note that use of the beta-test version is for testing only!  You cannot use any results for production, disclosure or any other reason until we remove the "Beta-Test" classification from it.  Also, we ask that you report any results that you do not believe to be accurate to us immediately so we can make any necessary corrections.  We're very excited about this next generation of eZMath and sincerely hope that it addresses the concerns and issues you'll have satisfying the requirements under the TRID rule.

New HUD Home Equity Conversion Mortgage (HECM)

by Michael Shohoney October 1, 2013 11:31

On September 3, 2013, HUD released Mortgagee Letter 13-27.  In it HUD made substantive changes to the Home Equity Conversion Mortgage (HECM) program that would go into effect on September 30, 2013.  The changes outlined in this ML, forced Math Corporation to revise both eZMathReverse and the ZMathReverse Engine.  Those changes have been made and both products were made available to our customers on September 29, 2013!

So, if you are a user of eZMathReverse, you need to use the new method (2013) for any transaction having a case number assigned on September 30, 2013 or later.  Please review the Mortgagee Letter for reference as there are issues that may affect your entries in the eZMathReverse calculator.  You need to address issues like Mandatory Obligations, additional Principal Limit, the correct MIP rates, etc., etc.  Also, depending on your results, your borrower may choose to make changes to how you've structured the transaction to better fit their needs.  So, there will be times when multiple runs of the product will be needed.

If you are a user of the ZMathReverse Engine and you have not responded to our contact with you, you need to let us know that you're ready for the engine.  Once you get in touch with us, we can have the software delivered immediately.

These changes are significant!  You need to look them over, understand them and apply them to the way you structure your transactions.  As always, if you have any questions, please feel free to contact us!

Simple Interest Mortgage

by Michael Shohoney September 14, 2012 09:19

Recently we've had a couple of inquiries along the lines of "Do you calculate a simple interest mortgage?"  Our response has been that virtually all of our calculations are simple interest.  Simple interest, as defined in the financial mathematics world, is interest that is not discount interest nor compound interest.  That is, it is a method of calculating interest.  There was confusion by those making the inquiry and evidence that they were looking for something else.  So, we did what anyone looking for answers does these days and "googled" "simple interest mortgage."

Well, we were surprised to find that the mortgage industry has used this name to indicate a mortgage that accrues interest on an Actual days basis versus a traditional 30/360 (or periodic) basis.  What we had was merely a difference in terminology.  We were using the classic financial mathematics term while our customers were using a new trend term in the industry.  Once we knew what they were looking for, it was easy to tell them how to calculate a simple interest mortgage.  All they had to do was choose the appropriate basis (usually Actual/365) from the Options and Variations screen or send the proper data into the ZMath Engine.  All of our loans offer the ability to choose the accrual basis you need.  So, yes, we calculate the simple interest mortgage!

Balloon Loans

by Michael Shohoney March 2, 2009 10:09

A question that we often deal with is how to structure balloon loans.  In a future post, we will look at how to mechanically structure balloons using eZMath and ZMath.  In this post we are going to discuss the different types of balloon loans and how they are structured.

 The first type of balloon loan is the type where a customer would like to pay a certain amount per month and the balance remaining on the loan with the final payment.  In order to have a balloon (i.e. a balance remaining at term), the desired payment must be less than the regular payment amount that would be calculated given the other terms (i.e. interest rate, term and amount) of the loan.  At the same time, it is usually essential that the payment amount desired by the borrower be enough that amortization (i.e. balance reduction) is occurring.  If those two criteria are met and a lender's policy will allow balloon lending, then the loan can be structured in this way.

 The second type of balloon loan is the type where the customer would like a certain amount of the loan to be left remaining (i.e. unamortized) at term.  That remaining balance will be paid with the final payment.  What occurs with this type of loan is that once the final balance is determined or set by the borrower, the regular payment amount is calculated.  That payment amount is made for one less than the number of payments in the loan and the final payment is the balance remaining plus the regular payment amount.  These types of balloons are often used when the borrower is expecting some kind of cash flow that coincides with the final payment of the loan (i.e. sale of the collateral, etc.) and the balance remaining equals or is slightly less than that cash flow.

 The final type of balloon loan is the type where the term upon which the payment amount is calculated (the amortization term) is less than the actual term of the loan.  We call this a prepay balloon.  This is the type of balloon loan that we commonly see in mortgage lending.  Sometimes it is termed a "X/Y Balloon Loan" where X is the amortization term and Y is the actual term (i.e. 30/7 Balloon Loan).  In this type of balloon, the payment amount is calculated based on the amortization term.  That payment amount is made for the number of payments in the actual term.  The resulting balance at term is paid in full (or refinanced) with the final payment.

That summarizes the types of balloon loans seen in the lending industry.  Our loan calculation software packages, eZMath and ZMath, easily calculate all three types.  In a posting in the Calculators 101 section in the next few days, we will look at how to structure each type.  In the mean time, if you ever have any questions on subject matter or the mechanics of running our software, please feel free to contact us.