The Total of Points & Fees: More Complicated & Important Than Ever

The calculation of points and fees has never been more important or complicated. This program explains when the total of points and fees is used, how the total is calculated and how to manage the number.

Financial Institutions have been calculating the total of points and fees for years to determine whether a transaction is a high-cost mortgage loan (Section 32). Most lenders have few, if any, high-cost mortgages so calculating the points and fees has not been a high priority.

But now the game is changing. The new calculation of points and fees is both more important and more complicated. It is not enough to know how to calculate the number; now it is also important to understand how to manage the number. With the new calculation and lower thresholds the volume of high-cost mortgages is going to increase. Plus the points and fees number has renewed importance. The number will soon be reported on the HMDA LAR. Of greatest concern, the number is used to determine whether a transaction is compliant with the new fee caps associated with six of the seven ability-to-repay options.


  • What items are included in the calculation of points and fees;
  • What items may be excluded from the calculation;
  • When and how the total of points and fees is used under current rules and in rules that will  unfold over the next several months;
  • How to manage points and fees to avoid fee cap violations associated with the:
    • “Standard Mortgage” rules contained in Section 1026.43(d)(1)(ii);
    • “Qualified Mortgage” rules contained in Section 1026.43(e)(2);
    • “Special Qualified Mortgage” rules contained in Section 1026.43(e)(4)(i);
    • “Small Creditor Portfolio Loans” as defined in Section 1026.43(e)(5)(i);
    • “Temporary Balloon-Payment Qualified Mortgage” as defined in Section 1026.43(e)(6)(i); and
    • “Balloon-payment qualified mortgage” rules contained in Section 1026.43(f)(1).


Managers, loan originators, loan officers, lending assistants, compliance officers, auditors and others responsible for originating mortgage loans.


Jack Holzknecht, CRCM, a principal with Pegasus Educational Services, LLC, has been delivering the word on lending compliance for 37 years. Jack’s career began as a federal bank examiner.  He also headed the form and software division of a regional consulting company and spent seven years in charge of their education division. He also developed and delivered training for the FDIC and OTS.

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