Lenders and brokers are still adjusting to the High Cost Mortgage Act, known as section 32, which was passed in October.

"Section 32 has had a huge impact on the industry," said Christine Clifford, vice president of marketing for Wholesale Access, a Columbia, Md., consulting firm. "We still need to see how it's going to play out."

The legislation requires a three-day wait and extra documentation from lenders making loans with high interest rates - 10% or more above the 30- year Treasury rate - or with fees of 8 points or more.

Few loans are made at such high rates, but some lenders say they must charge high points in order to make a profit on smaller loans, such as home equity loans.

Origination of high-points loans may increase substantially as lenders get comfortable with the new law.

The law made lenders shy away from high-priced loans, said Hugh Miller, president and chief executive at Delta Funding Corp., Woodbury, N.Y., but "then they came back, because they had to compete."

About 5% of Delta's business is in section 32 loans, Mr. Miller said.

Section 32 legislation is having its biggest impact on subprime lenders and those that make small home loans, typically less than $25,000. Many lenders are trying to avoid making the loans. Some are continuing to lend but are charging less.

"Those lenders that are not making these loans have been discounting on points" to get under the eight-point cutoff, said J. Terrell Brown, president and chief executive of United Companies Financial Corp., Baton Rouge, La.. "There's no doubt that they're making less profit."

United Companies had to make some adjustments to make and purchase section 32 loans, Mr. Brown said. New software was necessary, and additional legal work was required to provide explanations of the intricacies of the bill.

Despite the additional costs incurred, most major lenders have not increased their fees.

"It does mean more documentation, but it's just the cost of doing business for us," said Shannon Thurmond, marketing director at United Companies.

Time, not cost, is the real detriment to making Section 32 loans, many lenders say.

"Making section 32 loans is a very specific process," said Mr. Miller of Delta. "You have to give full disclosure, and then wait three days before closing. In the nonconforming world, lenders try to toot their own horn about being very flexible, but not with section 32."

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