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#1835659 - 07/23/13 06:57 PM APR Coverage Test
Runnin' on Empty Offline
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Is it possible that the TILA APR that we currently disclose is the accurate APR to use for High-cost mortgage APR Test if the loan's interest rate is fixed with no variances during the term of the loan?

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HOEPA and Homeowner Counseling Rule
#1835757 - 07/23/13 11:56 PM Re: APR Coverage Test Runnin' on Empty
rlcarey Online
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I don't understand your question?? Why would your APR not be accurate??
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#1835819 - 07/24/13 01:59 PM Re: APR Coverage Test rlcarey
Runnin' on Empty Offline
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On page 13 Section V of the CFPB's "2013 Home Ownership and Equity Protection Act (HOEPA) Rule is the source of my confusion. The first sentence reads as follows "You calculate the APR that you use to determine if a transaction is a high-cost mortgage differently from the APR that you disclose on your TILA disclosures.

They didn't say, it "may" be different. Well, if it's a fully amoritized fixed-rate loan, with no change in rate from time of lock, it will be the same APR as is disclosed on the TILA, right????

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#1836210 - 07/24/13 11:50 PM Re: APR Coverage Test Runnin' on Empty
rlcarey Online
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Yes - that would be correct.
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#1837224 - 07/29/13 01:36 PM Re: APR Coverage Test Runnin' on Empty
dblack Offline
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So to clarify..

30 year fixed rate loan

Note rate- 4%

TILA disclosure APR- 4.5%

APR used to determine HOEPA- 4.5%
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#1849629 - 09/06/13 07:38 PM Re: APR Coverage Test Runnin' on Empty
BCK Offline
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This is a source of confusion for me as well. The regulation says to determine the annual percentage rate, "For a transaction in which the annual percentage rate will not vary during the term of the loan or credit plan, the interest rate in effect as of the date the interest rate for the transaction is set." In the majority of cases at my institution, the interest rate on the date the interest rate is set is going to be the same as the interest rate on the loan at closing. So just using the APR on the TIL would be correct in this case? It's just if the interest rate would have changed from the date it was set to the date of closing that you would have to use a different number? That doesn't make sense to me, so maybe I'm interpreting that wrong?

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#1849636 - 09/06/13 07:43 PM Re: APR Coverage Test Runnin' on Empty
rlcarey Online
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In the majority of cases at my institution, the interest rate on the date the interest rate is set is going to be the same as the interest rate on the loan at closing

Isn't that how it works 100% of the time? How can the interest rate be "set" and then be different at closing.

If that is not the case, the interest rate was never actually set and it appears that you allow the rate to float until the day of closing.
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#1849652 - 09/06/13 08:09 PM Re: APR Coverage Test Runnin' on Empty
BCK Offline
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Hence my confusion.....if that's the way it is 100% of the time, then why does the CFPB's guide say that "you calculate the APR that you use to determine if a transaction is a high-cost mortgage differently from the APR that you disclose on your TILA disclosures" if you don't? That's why I feel like I must be interpreting this incorrectly because that doesn't make sense to me.

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#1849671 - 09/06/13 08:36 PM Re: APR Coverage Test Runnin' on Empty
rlcarey Online
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The single statement above is taken out of context. They addressed three scenarios and possibly in two of the three (ARMS and Stepped rate loans), the calculation of the APR for HOEPA coverage will be different than the APR disclosed on your TILA disclosure. You need to go back and read the whole answer to the question in the guide.
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#1849750 - 09/06/13 10:07 PM Re: APR Coverage Test Runnin' on Empty
BCK Offline
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Ah, that makes sense; we do not originate variable rate or stepped rate loans, so I wasn't even reading those paragrpahs to understand the differnece lies in them and not the fixed-rate transaction. I concur with Runnin' on Empty above; they should have indicated the calcculation MAY be different. The way it is written appears as though it IS different in all three scenarios. Thanks for holding my hand through it, rclarey!

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#1873145 - 11/21/13 03:53 PM Re: APR Coverage Test Runnin' on Empty
zmathguy Offline
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My confusion with the APR to use here lies with what amount to use for the amount financed in the calculation. I understand the payment streams (using the highest rate, etc.) but, do I use the amount financed from the regular TILA APR calculation or do I calculate a new amount financed based on the potentially revised loan amount, points and fees, etc. from HOEPA?

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#1873222 - 11/21/13 05:33 PM Re: APR Coverage Test Runnin' on Empty
Dan Persfull Offline
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The APR would be based on the amount financed (disclosed in the Fed Box), not the "total loan amount" used for the HOEPA points and fees test.
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#1873520 - 11/22/13 03:02 PM Re: APR Coverage Test Runnin' on Empty
zmathguy Offline
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Thanks, Dan. That was what I was thinking as well. At the same time, I didn't think that the section of the Reg was totally clear on it. Thank you for confirming my thoughts. Cheers.

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#1874323 - 11/26/13 03:21 PM Re: APR Coverage Test Runnin' on Empty
dblack Offline
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How are you guys going to pull an APR for the HCML test on an ARM?

We are contemplating running a "quote" on our system using the fully indexed rate just to have something to put in the closed file to verify what we used.

This is will be our first venture into ARMs so it is possible I am just over complicating things though...
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#1874561 - 11/26/13 09:47 PM Re: APR Coverage Test Runnin' on Empty
2Confused2go on Offline
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I just read the change in the APR for adjustable rate loans, and all ours have a cap of 18%. That makes them all HOEPA loans. Tell me I'm reading something wrong.
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#1874584 - 11/26/13 10:27 PM Re: APR Coverage Test Runnin' on Empty
2Confused2go on Offline
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Okay- found my answer. We would calculate at a higher rate if the margin was subject to change, which it is not. We will just calculate at the higher of the initial rate or the current index plus the margin.
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