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APR Adjustment as of Final Payment-Reimbursement
Answer by Richard Insley, BOL Guru
Guru Bios

Question:   An understatement of an APR was discovered. APRWIN states the APR Adjustment as of Final Payment. If the error is discovered within 30 days of loan consummation, then the reimbursement to the customer would only be a portion (30 days worth) of the reimbursement amount, correct?

Answer:   Reimbursements are required when there are significant understatements of FCs, APRs, or both. APR adjustments increase with the passage of time--until reaching a maximum value on the date the final payment is scheduled. FC adjustments do not have "time value"--the same dollar amount must be reimbursed to the borrower, regardless of the timing of the reimbursement.

When a single loan exhibits both an APR and FC understatement, the regulators' TIL enforcement policy requires the lender to calculate both adjustment values and reimburse the one that yields the larger payout. In order to make the comparison, APR adjustments are "aged" forward in time to their maximum value. APRWIN shows this "APR Adjustment as of Final Payment" for comparative purposes. The only time you would actually have to remit this maximum value would be in a case where the reimbursement was made on or after the final payment due date. In all other cases, the reimbursement value is discounted.

The notion of "30 days worth of the reimbursement" is directionally correct, but the payout value does not grow on a daily basis. Instead, the value steps up on the scheduled dates of the payments. The minimum payout is calculated "as of" the first payment due date. On the dates of all subsequent payments, the value steps up. Regardless of the exact date you issue a payout, the Enforcement Policy considers it done "as of" the next scheduled due date.

First published on 8/27/12

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