Skip to content
BOL Conferences
Thread Options
#2053247 - 12/09/15 03:05 PM Rate Spread
Patricia Offline
Gold Star
Joined: Mar 2011
Posts: 335
Kansas
I know this has been discussed in many threads before but just for the record I need some help. We have examiners here and they are saying that the date we used for rate spreads is not right. Background --- the bank does not have a lock-in rates. So we have been using the date the application was received as that was the date the rate was quoted. The rate did not change when the final docs were generated. However, I am seeing on some of the threads we should be using the date the final docs were generated.????

Return to Top
HMDA

   
HMDA Academy
#2053261 - 12/09/15 03:32 PM Re: Rate Spread Patricia
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 9,088
OK
I would think the danger in using the application date (if you truly don't lock rates) is that in a more volatile interest rate environment your bank might very well change (or want to change) the interest rate for an application that went on for a few weeks or months. Your current method seems to imply that you ARE locking in at the rate quoted at application. So if rates truly are floating, even though it might not have changed, your date doesn't work. That's my take anyway.
_________________________
I'm fixin' to fix that.

Return to Top
#2053266 - 12/09/15 03:42 PM Re: Rate Spread Patricia
Patricia Offline
Gold Star
Joined: Mar 2011
Posts: 335
Kansas
Thanks raitchjay.

Return to Top
#2053269 - 12/09/15 03:48 PM Re: Rate Spread Patricia
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Agree with RJ
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2053285 - 12/09/15 04:12 PM Re: Rate Spread Patricia
Rocky P Online
Power Poster
Joined: Jun 2003
Posts: 7,650
Florida
Agree. Since you do not lock, your rate/date would be when the documents are printed.
_________________________
Integrity. With it, nothing else matters. Without it, nothing else matters.

Return to Top
#2053288 - 12/09/15 04:16 PM Re: Rate Spread Patricia
#12 Online
Diamond Poster
Joined: Jun 2005
Posts: 1,343
For another perspective: the bank I was at prior didn't lock rates either. We established in procedure that the application date would be the date the rate was set, unless an appraisal came in and moved them to a different rate tier. Examiners were fine with that, as we established a set procedure and applied it consistently.
_________________________
CRCM

Return to Top
#2053320 - 12/09/15 05:20 PM Re: Rate Spread Patricia
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I don't believe you can say the date is always "x" or "y", if you don't lock rates. §1026.35(a)(1) says it is "the date the interest rate is set". That could be the application date or the date the GFE/LE was printed or some other date. It's when the date is set. Loan officers should be documenting when the rate was set and that's it.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2053327 - 12/09/15 05:39 PM Re: Rate Spread David Dickinson
Rocky P Online
Power Poster
Joined: Jun 2003
Posts: 7,650
Florida
Usually when the rate is not set, it "floats," usually to close. Under those circumstances, the banks I have been at sets the rate at the prevailing rate when the documents go to print.
_________________________
Integrity. With it, nothing else matters. Without it, nothing else matters.

Return to Top
#2053357 - 12/09/15 07:01 PM Re: Rate Spread Patricia
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Usually when the rate is not set, it "floats," usually to close.
I'm not sure how it works in your institution, but I don't see this at most clients we work with. I find it hard to believe a borrower has no idea what rate they are going to get until they come to the closing table. Also, "when the rate is set" does not require communication to the borrower. It's when the loan officer sets the rate. It's that simple.

If the loan officer communicates a rate to the borrower, then the rate has been set. If they don't communicate it to the borrower, that doesn't mean the rate hasn't been set. Maybe the loan officer wrote in the file, prepared an underwriting worksheet or simply thought "I think we can do this at X%". The day any of those happen is the day the rate was set. Document it and you're done.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2053458 - 12/09/15 11:32 PM Re: Rate Spread Patricia
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
It's when the loan officer sets the rate. It's that simple.


Well, maybe and maybe not. In the 80's, mortgage rates floated until the day of closing unless a rate lock agreement was executed. Two days could mean the bank was underwater by several hundred basis points. People have become a little lackadaisical in this stable interest rate environment. When I was working at a bank, a loan officer never had the authority to "lock a rate" unless an official rate lock agreement was executed.

You need to sit down with the head of your ALCO committee and ask them if these so called unofficial rate sets would hold any water if rates jumped 2 percent in the next ten days before you decide when a rate is set on a loan,.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2053476 - 12/10/15 03:12 AM Re: Rate Spread Patricia
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
If the rate changes, then you have a new date that the rate was set. My point is that I don't think you can say it's always the date of application, the date loan docs are printed or it's always the date of closing, if we haven't locked the date. It's simply the date the rate was set - whatever that is. And it can be a different date for every loan.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top
#2053873 - 12/11/15 09:07 PM Re: Rate Spread Patricia
Dan Persfull Online
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Where there is no formal rate lock agreement then for us the date is always the date the loan documents are prepared. That is the date the rate is set for the final time from the rate sheet that is in effect for that day.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2053889 - 12/11/15 09:59 PM Re: Rate Spread Patricia
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I agree in most cases Dan, but my point is it could be a day or 2 earlier. If the loan officer said "we're going to do this at X% on the 1st and the docs are prepared on the 3rd, the "date the rate was set" would be the 1st, not the 3rd.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top

Moderator:  SMQ, CRCM