I am looking at our HMDA data for fair lending. I was wondering how the rate spread should be looked at. I am looking at the rate and the apr and discounting the rate spread all together because the rate and apr seems to tell me more than looking at the rate spread. The rate spread is just telling us if it is a HPML in relation to the weekly survey, does it really have any significance in the scheme of things? How are other banks using this?

The rate spread has a huge difference in the scheme of things! The interest rate can fluctuate daily, especially with a lot of different product lines, so can the APR. The rate spread takes the date and product into consideration, and comes out with a number - something like unit pricing. Look at the rate spread and compare the GMI information on those loans with rate spread to those loans without rate spread.

If you have protected class borrowers having loans with rate spread and control group getting the better rates, the bank should determine why - because the regulators will most certainly bring it up! Just think of it as part of a rate and terms review.