If a loan approval in file corresponded with the bank's consumer interest rate matrix, but a lower rate was given at origination, seeming to reduce the rate spread on a subordinate lien mortgage loan to 8.499 for HOEPA computation purposes....what should be a reviewers next step...while varying from the rate matrix can cause fair lending issues, it was not done on a prohibited basis.... any thoughts out there?

No thought at all. What did you have in mind??

Thought #1, is it a violation of not requiring the Home Ownership counseling, and that the loan should not have originated as a balloon. There isn't an avoidance warning in that section of the regulation that I could find, but sometimes they go with UDAAP and the intent of the statute...

Thought #2, it is a fair lending issue, pricing outside of policy, oh but it really isn't because it was not on a prohibited basis, it was on a HOEPA basis.... So if done on a regular basis and on purpose would that be a disparate impact situation. I do not think so, but anything we can identify ourselves and address now....helps...

Thought #3, it is merely a non compliance with a loan approval and move on.

Many banks adjust pricing to not make a HPML loan. They do it for everyone - it is not a fair lending issue.

Same can be said for HCMLs/HOEPA loans.