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#1782040 - 02/01/13 10:08 AM New HPML Threshold on Jumbo Loans and HMDA
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
In the new rule, we identified that the definition of HPML on Jumbo loans has permenently increased, effective 6/1/2013, from 1.5 (first liens - all encompassing) to 2.5 (non-conforming/Jumbo)

This change is not exclusive to the escrow provision, as previoulsy carved out, rather appears to be a change in the basic definition of HMPL on Jumbo loans.

Regarding HMDA (Reg C), the rate spread definition specifically states the following:

"...report the spread between the annual percentage rate (APR) and the average prime offer rate for a comparable transaction if the spread is equal to or greater than 1.5 percentage points for first-lien loans or 3.5 percentage points for subordinate-lien loans."

As the definition is not explicity tied to the HPML definition under Regulation Z, and it does not appear the CFPB has addressed the HMDA rate spread, how are other institutions planning to handle HMDA reporting after 6/1/2013?

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Escrows on Higher-Priced Mortgages
#1782066 - 02/01/13 10:51 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
In the 2008 Ammendments to Regulation C, I found the following language:

12 CFR Part 203, official staff interpretation:

B. Reasons for Following the RegulationZ Final Rule

As noted above, the Board’s objective in setting the rate spread reporting threshold has been to cover subprime mortgages and generally to avoid covering prime mortgages. The same purpose underlies the definition of ‘‘higher-priced mortgage loan’’ that the Board adopted under Regulation Z.

For the reasons discussed above, the Board believes the definition adopted under Regulation Z, when applied to Regulation C, will better achieve this purpose and ensure more consistent and more useful HMDA data. Moreover, using the same definition in both Regulation Z and Regulation C will reduce compliance burdens.




Edited by ko1234 (02/01/13 10:56 AM)

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#1782069 - 02/01/13 10:53 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
Having said that, rate spread is defined in Regulation C based on the 2008 Regulation Z HPML definition.

Regulation C does not provide, in its definition, that the rate spread definition will always be based on Regulation Z (i.e. continually update with the rule).

Anyone have any thoughts?

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#1782093 - 02/01/13 11:22 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
I have also reviewed the 2013 HOEPA final rule commentary, and found another reference:

In response to commenters’ suggestions that the FFIEC rate-spread calculator be adapted for use in determining HOEPA coverage, the Bureau does not anticipate difficulties in using the calculator for this purpose. The calculator exists on the FFIEC website primarily for use in determining the “rate spread” that must be reported, if any, under HMDA and Regulation C, 12 CFR part 1003. Specifically Regulation C § 1003.4(a)(12) requires HMDA reporters to report the spread between a loan’s APR and the applicable average prime offer rate (determined identically to the determination for higher-priced mortgage loans under § 1026.35) if that spread exceeds 1.5 percentage points for a first-lien loan or 3.5 percentage points for a subordinate-lien loan.

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#1782137 - 02/01/13 12:17 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ahou Offline
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Registered: 08/15/02
Posts: 2703
...determined identically to the determination for higher-priced mortgage loans under § 1026.35) if that spread exceeds 1.5 percentage points for a first-lien loan or 3.5 percentage points for a subordinate-lien loan.

The key word is "If" and goes on to specify 1.5 and 3.5. The jumbo ln threshold is only for escrows, as far as I can tell....still not finished reading all of this stuff.
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#1782139 - 02/01/13 12:21 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
Thank you for reviewing this, ahou. From the January 10, 2013 final rule:

PART 1026—TRUTH IN LENDING (REGULATION Z)
Subpart E—Special Rules for Certain Home Mortgage Transactions
§ 1026.35 Requirements for higher-priced mortgage loans.

a) Definitions. For purposes of this section:

1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:

(i) By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction’s interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac;

(ii) By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction’s interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac; or

(iii) By 3.5 or more percentage points for loans secured by a subordinate lien.


Edited by ko1234 (02/01/13 12:21 PM)

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#1782171 - 02/01/13 01:11 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16393
Loc: The Swamp
I agree with ko1234 off the top of my head. They moved the definition of jumbo threshold out of escrow and in to the general definition...so it does possibly present an issue, it appears.
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My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1782194 - 02/01/13 01:34 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16393
Loc: The Swamp
BTW, it's also supported in the appraisal guidelines:

Threshold for “Jumbo” Loans
Comment 35(a)(1)-3 explains that § 1026.35(a)(1)(ii) provides a separate threshold for
determining whether a transaction is a higher-priced mortgage loan subject to § 1026.35 when
the principal balance exceeds the limit in effect as of the date the transaction’s rate is set for the
maximum principal obligation eligible for purchase by Freddie Mac (a “jumbo” loan). The
comment further explains that FHFA establishes and adjusts the maximum principal obligation
pursuant to rules under 12 U.S.C. 1454(a)(2) and other provisions of Federal law. The comment
clarifies that adjustments to the maximum principal obligation made by FHFA apply in
determining whether a mortgage loan is a “jumbo” loan to which the separate coverage threshold
in § 1026.35(a)(1)(ii) applies.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1782212 - 02/01/13 02:00 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
ko1234 Offline
New Poster

Registered: 09/20/11
Posts: 9
Thank you, RR Joker. So, from a practical standpoint, if the definition of "rate spread" under Regulation C does not change (i.e. remains at 1.5 and 3.5 without regard to conforming/non-conforming), what is the impact?

Thinking this through, our HMDA process will not change unless Regulation C is formally updated to change the definition of a rate spread in accordance with the new definition of HPML under Regulation Z.

At this time, I am unable to find any indication by the CFPB that Regulation C is in any way pending change.

What am I missing? What is the impact of having the rate spread definition differ from the HPML definition?

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#1782250 - 02/01/13 02:42 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16393
Loc: The Swamp
I'm thinking, without Reg C changing, we will have to use two differnent calculation tools.

Unintended consequence of moving the jumbo reference? crazy


Edited by RR Joker (02/01/13 02:43 PM)
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1782269 - 02/01/13 03:05 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16393
Loc: The Swamp
FWIW, I have written the CFPB requesting guidance. We'll see.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1782433 - 02/02/13 08:08 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 50412
Loc: Galveston, TX
I'm thinking, without Reg C changing, we will have to use two differnent calculation tools.

Why, if you have a jumbo loan and you punch it into the FFIEC website and is comes back with a spread of 2.49 or less, you know you don't have an HPML and you have the rate spread to report for HMDA?

I really don't see this as a big deal and they will probably address this when they add the other forty seven data points that the DFA is going to require to be reported under HMDA anyway. I doubt they will tweak it for this when that are facing with a total revamp of the data gathering process.
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The opinions expressed are my own, take them or leave them.

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#1782523 - 02/04/13 10:34 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
RR Joker Offline
10K Club

Registered: 11/15/02
Posts: 16393
Loc: The Swamp
There shouldn't be a rate spread tho...if it worked like the other spreads...IOW, if it's not HPML, it should report NA.

Just sayin.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#1784090 - 02/08/13 09:37 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
KPOC Offline
Gold Star

Registered: 07/09/12
Posts: 460
Loc: Greater Boston Area
This is something I've been looking at too. I think a good way to think about it is that the Rate Spread column on the LAR is not there to report HPMLs. You can gather that information using the Occupancy column also, but HPMLs must be secured by a primary dwelling and Regulation C reports loans secured by any dwelling. So they are not exactly the same. I think the threshold consistency between Reg. C and Z was convenient in the past, but they aren't showing the same things. Perhaps Reg. C will be updated, but until then I wouldn't change anything.


Edited by KPOC (02/08/13 12:47 PM)

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#1826560 - 06/24/13 11:32 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
Gr8Hoppers Offline
Member

Registered: 07/22/08
Posts: 72
Loc: Central Missouri
Now I am confused... rate spreads are entered in this field only if the loan is subject to rReg Z other wise you report NA. So do we enter the number that is calculating off of 1.5% threshold for jumbos, or what it would be with the 2.5% threshold for jumbo's, since the entry itself is tied to Reg Z.
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#1858423 - 10/04/13 09:36 AM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
fslic banker Offline
100 Club

Registered: 01/05/11
Posts: 145
A good spread but I didn't see any consensus. I have a jumbo, first lien mortgage subject to Regulation Z with a Rate Spread of 1.79%. Should I report on my LAR the 1.79% spread or as N/A as its below the 2.5% jumbo threshold and therefore not a HPML. Based on a review of Reg C only it would appear that I should show the RS on the LAR.

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#1858629 - 10/04/13 12:16 PM Re: New HPML Threshold on Jumbo Loans and HMDA [Re: ko1234]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 40993
Loc: Bloomington, IN
Until Reg. C is revised you report the rate spread based on the following regulatory requirement.

1003.4(12)(i) For originated loans subject to Regulation Z, 12 CFR part 1026, the difference between the loan's annual percentage rate (APR) and the average prime offer rate for a comparable transaction as of the date the interest rate is set, if that difference is equal to or greater than 1.5 percentage points for loans secured by a first lien on a dwelling, or equal to or greater than 3.5 percentage points for loans secured by a subordinate lien on a dwelling.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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