Is there a “bright line” test for bona fide discount fees?
• The new law does not provide for a specific percent that the rate must drop for the discount to be considered bona fide. Bona fide discount points mean an amount knowingly paid by a borrower for the express purpose of reducing, and which in fact does result in a bona fide reduction of, the interest rate applicable to a residential mortgage loan, as long as the undiscounted interest rate for the residential mortgage loan does not exceed the Conventional Mortgage Rate by more than 2 percentage points for a residential mortgage loan secured by a first lien or by 3.5 percentage points for a residential mortgage loan secured by a subordinated lien.
Related Questions
- Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test?
- On the 2555ez do I qualify for the exemption under the Bona Fide Resident Test or the Physical Presence Test?
- Is there a "bright line" test for bona fide discount fees?
