Can someone explain this to me?


(3) Determination of annual percentage rate. For purposes of paragraph (a)(1)(i) of this section, a creditor shall determine the annual percentage rate for a closed- or open-end credit transaction based on the following:

(i) 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;

(ii) For a transaction in which the interest rate may vary during the term of the loan or credit plan in accordance with an index, the interest rate that results from adding the maximum margin permitted at any time during the term of the loan or credit plan to the value of the index rate in effect as of the date the interest rate for the transaction is set, or the introductory interest rate, whichever is greater; and

(iii) For a transaction in which the interest rate may or will vary during the term of the loan or credit plan, other than a transaction described in paragraph (a)(3)(ii) of this section, the maximum interest rate that may be imposed during the term of the loan or credit plan.

Do we have to calculate new payment streams as if the rate was the same for whole loan?

Yes

So for example if a loan has an intro rate 3% and the index is .15 and the margin is 4% we would calculate the APR as if the rate was 4.15 for the whole loan?

That is my understanding.

I am struggling with section (iii) listed above. Maximum interest rate during the term of the loan. For our HELOC's we tie the rate to prime and cap the maximum increase per quarter at 1%, so even using the first 60 months we'd be at the maximum rate of 18%. Thus making EVERY one of our HELOCS High Cost and mandating Homeownership counseling in all cases?

You would use (ii) if you tie to prime.

So if we are starting out at prime plus anything up to 6.49% we would still be below the 6.5% trigger? So basically using prime as our APOR, which we do offer to A+ borrowers.

That makes sense and takes at least one thing off my list of headaches!

Well you still have to calculate your APR for that transaction, but that is the interest rate you would as the base for the calculation.

If you do prime plus 1- You use 4.25% as the base to determine your APR, then compare the APR to the APOR.

We have a fully variable HELOC that ties to Prime. The rate can change daily. What would be your suggestions on which APOR rate I should be comparing my daily changing APR to in order to run HOEPA rate test? The first APOR option we have in the FFIEC tables is the rate adjustable in 1 year... Help, please!

One year is your only option.

I sure hope your periodic HELOC statements are set up to potentially disclose 31 different APRs in one statement cycle.

Wanting to see if I am understanding this correctly:

Our HELOC is: Prime + 0, Min Int Rate of 6%, Max @ 18%, it is a 15 yr draw, with a fixed rate at end of 15yr draw

For test one of HOEPA,
A. I would use the 6.0 for APR
B. For APOR I use the Closed end at 15 yrs today is 3.65
C. It is a subordiante lien - 8.50

Not a high cost: A not greater than C

Any input would be great.

How often can the rate change in the first 15 years?

when prime rate changes

Then you would mark the FFIEC calculator as adjustable,the fixed rate period as 1 year, and APR as 6%.

Thanks