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#1740418 - 09/12/12 10:03 PM Rate spread accuracy
James Hill Offline
Member
Joined: Aug 2011
Posts: 55
Spokane, WA
We recently came upon this question during an internal audit.

- Is there a tolerance for rate spread accuracy in HMDA?

We have some loans with rate spreads where the APR changed slightly after the final TIL was issued, so the documented APR may not match the LAR APR that was used to calculate the rate spread. Since we don't have to redisclose the APR if it is within Reg Z tolerance, our LAR-to-file review produced some rate spread variances. (Our APR exports from the LOS and reflects the APR on the closed loan, not the disclosure.)

I can't find anything about a tolerance in the guidance, so my assumption is that if it is off by any amount it would be considered a key field error. Has anyone run into this in an exam or elsewhwere?
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James Hill, CUCE, CRCM

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#1740424 - 09/12/12 10:34 PM Re: Rate spread accuracy James Hill
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,227
Galveston, TX
You base your reports in the APR disclosure given to the customer. You should not be recalculating the APR.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1740470 - 09/13/12 12:25 PM Re: Rate spread accuracy James Hill
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,761
Bloomington, IN
I can't find anything about a tolerance in the guidance,

That's because there is none.

If the final APR disclosed to the borrower was 5.456 and you entered it as 5.45 instead of 5.46 then your rate spread will be inaccurate and that rounding could very easily cause the rate spread to hit the threshold. As an example: The APOR for this loan is 3.96. 5.45 - 3.96 = 1.49 therefore the rate spread on the LAR would be NA. However 5.46 - 3.96 = 1.50 which is the threshold and the rate spread on the LAR would be reported as 1.50.

Each one of these inaccurate APR entries can result in errors on the LAR which will reflect in the HMDA exam.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1784474 - 02/08/13 11:08 PM Re: Rate spread accuracy James Hill
nikicole03 Offline
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Joined: May 2012
Posts: 6
By chance, are you using Encompass?

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#1784565 - 02/10/13 05:40 PM Re: Rate spread accuracy James Hill
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,622
I agree with Randy and Dan. You should use your Final TIL to verify the rate spread. This should also help you uncover instances where a rate spread is reported but should not be because the loan is not subject to Regulation Z.
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Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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