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third party charges not retained by the mortgage origi- nator, creditor, or an affiliate of the creditor or mort- gage originator). ‘‘(ii) COMPUTATION.—For purposes of computing the total points and fees under this subparagraph, the total points and fees shall exclude either of the amounts described in the following subclauses, but not both: ‘‘(I) Up to and including 2 bona fide discount points payable by the consumer in connection with the mortgage, but only if the interest rate from which the mortgage’s interest rate will be dis- counted does not exceed by more than 1 percentage point the average prime offer rate. ‘‘(II) Unless 2 bona fide discount points have been excluded under subclause (I), up to and including 1 bona fide discount point payable by the consumer in connection with the mortgage, but only if the interest rate from which the mort- gage’s interest rate will be discounted does not exceed by more than 2 percentage points the aver- age prime offer rate. ‘‘(iii) BONA FIDE DISCOUNT POINTS DEFINED.—For purposes of clause (ii), the term ‘bona fide discount points’ means loan discount points which are knowingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage. ‘‘(iv) INTEREST RATE REDUCTION.—Subclauses (I) and (II) of clause (ii) shall not apply to discount points used to purchase an interest rate reduction unless the amount of the interest rate reduction purchased is reasonably consistent with established industry norms and practices for secondary mortgage market transactions. ‘‘(D) SMALLER LOANS.—The Board shall prescribe rules Regulations. adjusting the criteria under subparagraph (A)(vii) in order to permit lenders that extend smaller loans to meet the requirements of the presumption of compliance under para- graph (1). In prescribing such rules, the Board shall con- Urban and rural sider the potential impact of such rules on rural areas areas. and other areas where home values are lower. ‘‘(E) BALLOON LOANS.—The Board may, by regulation, provide that the term ‘qualified mortgage’ includes a bal- loon loan— ‘‘(i) that meets all of the criteria for a qualified mortgage under subparagraph (A) (except clauses (i)(II), (ii), (iv), and (v) of such subparagraph); ‘‘(ii) for which the creditor makes a determination that the consumer is able to make all scheduled pay- ments, except the balloon payment, out of income or assets other than the collateral; LAWS ‘‘(iii) for which the underwriting is based on a payment schedule that fully amortizes the loan over a period of not more than 30 years and takes intoPUBLIC with on anorris VerDate Nov 24 2008 22:28 Sep 03, 2010 Jkt 089139 PO 00203 Frm 00773 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL203.111 PUBL203