New Mexico Administrative Code › Title 12 - TRADE, COMMERCE AND BANKING › Chapter 15 - FINANCIAL INSTITUTIONS - GENERAL › Part 5 - HOME LOAN PROTECTION ACT - FLIPPING › Section 12.15.5.9 - REASONABLE, TANGIBLE NET BENEFIT TO THE BORROWER

Current through Register Vol. 35, No. 13, July 16, 2024
A. The reasonable, tangible net benefit"
				standard in Section
				58-21A-4
				B NMSA 1978, is inherently dependent upon the totality of facts and
				circumstances relating to a specific transaction. While the refinancing of
				certain home loans may clearly provide a reasonable, tangible net benefit,
				others may require closer scrutiny to determine whether a particular loan
				provides the requisite benefit to a borrower.
B. Because of the fact-specific nature of the
				"reasonable, tangible net benefit" inquiry, lenders are not expected to create
				a single one-size-fits-all test to use for every loan application. While the
				majority of loans may be evaluated using an appropriate economic analysis of
				the old and new loan, each lender should develop and maintain policies and
				procedures for evaluating loans in circumstances where an economic test,
				standing alone, may not be sufficient to determine that the transaction
				provides the requisite benefit.
C.
				In evaluating whether lenders are in compliance with the flipping provision,
				the financial institutions division will focus on whether a lender has policies
				and procedures in place and that were used to determine that borrowers received
				a reasonable, tangible net benefit in connection with the refinancing of loans.
				For example, lenders may wish to create procedures for additional upper-level
				management review in cases where the benefit to the customer is not clear based
				on a simple calculation of savings. Lenders may also wish to devise worksheets
				for collecting relevant information from the borrower such as the borrower's
				financial status, objectives for use of the funds and knowledge of other
				alternatives.
D. Examples of
				factors that could be relevant include, but are not limited to, the following:
(1) Terms of the new and old loan, including,
				but not limited to, note rate, amortization schedule, and balloon payment
				provisions, provided that costs associated with (and paid at or before closing
				of) the old loan, such as closing costs or points and fees other than
				prepayment penalties, are not normally relevant to the determination of
				flipping;
(2) Costs of the new
				loan, including points and fees charged on the new loan as well as other
				closing costs associated with the transaction as routinely disclosed on the
				closing statement;
(a) loan-to-value ratio of
				the new loan compared to that associated with the outstanding balance on the
				existing loan;
(b) debt-to-income
				ratio of the borrower before and after the transaction;
(c) amount of time that has lapsed between
				the new loan and the origination of the old loan or previous refinancing;
				and
(d) in cases where economic
				benefits do not demonstrably indicate that a reasonable, tangible net benefit
				has occurred, a significant reason that explains the need for, and proposed use
				of, the loan proceeds.