Discount Points [HUD] Law and Legal Definition

Pursuant to 24 CFR 201.2 [Title 24 Housing and Urban Development; Subtitle B Regulations Relating to Housing and Urban Development; Chapter II Office of Assistant Secretary for Housing Federal Housing Commissioner, Department of Housing and Urban Development; Subchapter B Mortgage and Loan Insurance Programs under National Housing Act and Other Authorities; Part 201 Title I Property Improvement and Manufactured Home Loans; Subpart A General], the term Discount Points means “a fee charged by the lender, separate from interest but part of the total finance charges on the loan, that is part of the lender's total yield on the loan needed to maintain a competitive position with other types of investments. One discount point equals one percent of the principal amount of the loan. As discount points on the loan increase, the interest rate can be expected to decrease in a fairly consistent relationship.”