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#2149474 - 10/11/17 09:22 PM helocs don't have rate spreads...do they
river girl Offline
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We have never reported our helocs before so this will be something new for us.
Do we need to figure out how to calculate rate spread for a heloc?
If so, I'm not sure how to do that calculation. Any guidance is appreciated.

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#2149516 - 10/12/17 01:38 PM Re: helocs don't have rate spreads...do they river girl
Dan Persfull Offline
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You should be calculating rate spreads now to be sure the HELOC does not fall into a high cost loan.

From 1026.32:

(a) Coverage. (1) The requirements of this section apply to a high-cost mortgage, which is any consumer credit transaction that is secured by the consumer's principal dwelling, other than as provided in paragraph (a)(2) of this section, and in which:

HELOCs are not listed under the exemptions.

We currently use the FFIEC rate spread calculator.
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#2149520 - 10/12/17 01:59 PM Re: helocs don't have rate spreads...do they river girl
rlcarey Online
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Preamble:

Several industry commenters asked for clarification on whether the rate spread field will be required to be completed on loans subject to Regulation Z but exempted from the higher-priced loan category in Regulation Z § 1026.35, such as a home equity lines of credit. The Bureau believes that the rate spread data on most transactions, including open-end lines of credit, would be beneficial by providing data to contribute to a more complete understanding of the mortgage market.
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#2149555 - 10/12/17 04:00 PM Re: helocs don't have rate spreads...do they river girl
GTS333 Offline
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Just a point of clarification, the rate spread reported for 2018 HMDA data doesn't need to be a high-cost mortgage to be reported, it simply has to be subject to Reg. Z. I believe Dan is referring to 2017 requirements when he mentions high cost loans, while rlcarey is pointing to the 2018 aspects, so I just want to make sure that the distinction is clear. It is an important, but often overlooked change between 2017 and 2018 data.
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#2151431 - 10/27/17 03:51 PM Re: helocs don't have rate spreads...do they Dan Persfull
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Originally Posted By Dan Persfull
We currently use the FFIEC rate spread calculator.


How do you use the rate spread calculator? I didn't think it was meant for HELOCs.

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#2151449 - 10/27/17 04:24 PM Re: helocs don't have rate spreads...do they river girl
Dan Persfull Offline
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I have never seen any comments the calculator could not be used for HELOCs.

The HELOC is a variable rate loan. We choose adjustable, enter the date the rate was last set, enter the corresponding APR, enter 1 for the variable term and the appropriate lien position.

To the best of my knowledge there is not a APOR table for HELOCs that is separate from the fixed and variable rate tables.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2151461 - 10/27/17 04:51 PM Re: helocs don't have rate spreads...do they Dan Persfull
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Originally Posted By Dan Persfull
I have never seen any comments the calculator could not be used for HELOCs.


In the HELP section for the FFIEC Rate Spread Calculator, it says:
The rate spread is not calculated on Home Equity Lines of Credit (HELOCs). If the institution chooses to report HELOCs, the rate spread should be equal to 'NA'.

Perhaps they will update this at some point in light of the 2018 changes.

But, isn't the rate and the APR on a HELOC the same?

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#2151464 - 10/27/17 05:02 PM Re: helocs don't have rate spreads...do they river girl
Dan Persfull Offline
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That comment has been in the Help section since the implementation of the calculator. Until the Reg. Z revision that brought HELOCs into the high cost loan mix a rate spread was not calculated for HELOCs and if the FI opted to report their HELOCs they would report NA for the rate spread.

The initial rate and the corresponding APR are generally the same at consummation but that can happen on a fixed rate loan also if no prepaid finance charges are involved. As long as you are comparing the disclosed corresponding APR to the applicable APOR I see no issues.
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#2151498 - 10/27/17 06:10 PM Re: helocs don't have rate spreads...do they river girl
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Interesting - thanks for the advice!

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#2171786 - 04/04/18 03:32 PM Re: helocs don't have rate spreads...do they river girl
kglasser Offline
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I know this is a 6 month old post, but I have a related question. I am new to dwelling secured regs, and I am feeling it!
We would like to use the calculator when a member chooses lock in -feature of our HELOC to ensure the fixed
rate segment is still under the high-cost threshold, but I am not sure in how we can do that.
The fixed rate segment is based on the credit tier the original credit score set for the loan, the term of the fixed segment, and LTV.
Suggestions?

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#2171789 - 04/04/18 03:37 PM Re: helocs don't have rate spreads...do they river girl
rlcarey Online
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when a member chooses lock in -feature of our HELOC

The loan has closed, this is merely a feature of the product - for what and why are you testing?
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#2171796 - 04/04/18 03:51 PM Re: helocs don't have rate spreads...do they river girl
kglasser Offline
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The product determines the rate for the locked-in feature differently than the variable-rate. The initial calculation is done with the variable The lending department wants to ensure the fixed-rate does not thrust the product into a high-cost threshold, as it can exceed the fully-indexed rate used for the variable portion.

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#2171803 - 04/04/18 04:02 PM Re: helocs don't have rate spreads...do they river girl
rlcarey Online
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If you say so. Have them point to any regulations that says you take into consideration an optional feature offered on a HELOC that can only be exercised after the account is actually opened.
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#2171835 - 04/04/18 04:46 PM Re: helocs don't have rate spreads...do they kglasser
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This has been a learning opportunity, to be certain. So, the Reg states we only run the test at consummation based on the fully-indexed rate for the day the transaction is set, and then there is no obligation to ensure the actual rate for any used balance on the line after that point?

Or should we compute the max rate that could apply on a fixed segment the day the transaction is set at consummation?

It is the fixed segment rate that is throwing us all off here. Thanks for your help.

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#2171937 - 04/04/18 08:07 PM Re: helocs don't have rate spreads...do they river girl
Dan Persfull Offline
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Bloomington, IN
Your high cost determination is based on the APR compared to the applicable APOR at consummation. Subsequent events are not subject to the high cost determination unless the subsequent event constitutes a refinancing under the regulation. Exercising a fixed rate option on a HELOC would not be a refinancing.
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#2172307 - 04/06/18 03:48 PM Re: helocs don't have rate spreads...do they river girl
kglasser Offline
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Posts: 67
Thank you! One more question. If we use the FFIEC calculator to determine whether a HELOC is High Cost, we will enter
Action Type (usually 1)
Reverse Mortgage defaults to 2
Amortization Type is Variable (it will vary after one year intro)
The Rate Set Date
The APR which will be the greater of the fully-indexed rate (that'd be in effect on the date we set the rate) or the introductory rate
And 1 years to first Adjustment.
Then, if the rate spread that computes from that meets/exceeds any of the thresholds provided under HOEPA, it would be a high-cost mortgage.
Do I have it? Please tell me that I have it? My lending dept previously used the APOR tables, and now that those don't exist, they want guidance on how to compute the HC thresholds.

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#2172316 - 04/06/18 04:26 PM Re: helocs don't have rate spreads...do they river girl
rlcarey Online
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Galveston, TX
My lending dept previously used the APOR tables, and now that those don't exist, they want guidance on how to compute the HC thresholds.

Sure they do, you can download them here: https://ffiec.cfpb.gov/tools/rate-spread
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#2172323 - 04/06/18 04:35 PM Re: helocs don't have rate spreads...do they river girl
kglasser Offline
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Posts: 67
Well, there you go. So it is. "...'Average Prime Offer Rates' fixed table or adjustable table." Thank you very much. Man that thing is ugly;
If they want to use the calculator option, is that how it should be done? Or are using the tables the best way to go?
Last edited by kglasser; 04/06/18 04:37 PM.
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#2172344 - 04/06/18 05:30 PM Re: helocs don't have rate spreads...do they river girl
rlcarey Online
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rlcarey
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Galveston, TX
Open the CFPB website with the new table.
Do this:

Click on File – Save as
Download and save the .txt file
Open Microsoft Excel
From the ‘Data’ tab, select ‘From Text’
Navigate to the .txt file and click Import
Choose next
Select the “Other” checkbox from the list of delimiters
Enter a pipe character, i.e. “I” in the box to the right of “Other”
Click finish.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2172382 - 04/06/18 07:06 PM Re: helocs don't have rate spreads...do they river girl
kglasser Offline
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Joined: Jun 2016
Posts: 67
You are my hero. Thank you!

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