Need help re: Total Fees & Points Can't Exceed 5% of Loan - 2 Different LO Having 2 Different Ideas of "Fees & Points" (insurance, interest rate)

[Jane0218]

'Fees and points' cannot exceed 5% of the loan (mortgage). If they do, then it's considered a "high cost loan." I'm planning on a VERY small mortgage.

• 1st LO gave me a loan worksheet scenario (10/23) showing:
  "Closing cost = $2,343 + Prepaids = $1,647 = $3,990," which exceed the 5% of $75,000 loan he used for my loan scenario (5% x 75k = $3,750). House cost of $155k.
• He increased my interest rate from 4.125% to 4.5% because he said he had no other way to get their fees. When I asked what fees he wrote "origination charge or points to buydown your rate."

This is confusing.
If $3,990 (closing costs + prepaids) is what the new regulations use for "fees and points," which included PREPAIDS, then this loan is a high cost loan, right? Then we'll need to go to that special counseling (IF this scenario played out exactly)?

• 2nd LO sent a worksheet (10/28) using a $60k loan and showed:
  "Closing costs are $2317 and escrows are $1343. You do not need owner’s title insurance(that's for an entirely different post--I don't get that at all)." (He wrote he likes to "go high" for prop. taxes and hazard ins). Interest rate of 4.125% . House cost: $100,000. [Although I asked for the same house sale amt and down payment from both, did I get that? Nope.]
• He wrote: "Do not worry about a high cost loan. You are okay. Lenders are allowed to have 5% of the loan amount in fees and you are not close. I’m not charging any points to you.."

Again, confusing. 5% of a $60k loan = $3,000. Closing.costs + escrows = 3,670 and that's ABOVE $3,000. This person must believe ONLY "Closing costs" are used to determine a high-cost loan.

I know I can ask them what they believe, but I need to know what is the truth first. I've gone through the regulations. I'm not 100% sure about it.

• Do 'fees plus points' include PREPAIDS (escrow for pro-rated property taxes, hazard insurance [1 full year + prorated], prepaid interest for the loan)?
  

Thanks in advance for any advice or any link that can explain this to me easily.

[FalconheadWest]

Prepaids are not lender fees or points. Lender fees are processing, underwriting, administration, etc... points are usually in the form of an origination point or points to buy down the rate. Fees and points are NOT to include third party fees that the lender has no control over. Taxes, escrows, title, courier fees, recording fees, etc... are not part of lender fees. Those are "closing costs and prepaids".