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#2203791 - 01/24/19 12:28 AM Rate Spread and Second Homes
HMDA Warrior Offline
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Joined: Jan 2018
Posts: 48
Our HMDA Software is giving me a Quality check that says "Loan may not be subject to Reg Z and Rate Spread not NA." All of the loans that this comes up on are Funded Second Homes. My interpretation of this message is that Second Homes may not be subject to Reg Z, so the Rate Spread should be reported as NA.

I cannot find anything in Reg Z about Second Homes being exempt from rate spread calculations or disclosures and there is nothing in Reg C, the FIG or HMDA Getting it Right that addresses this. Reg C states that the Rate Spread is to be reported as NA if the loan is not subject to Reg Z, but it does not indicate a specific section (seems to indicate exemption from ALL of Reg Z).

7. Rate spread - not applicable. If the covered loan is an assumption, reverse mortgage, a purchased loan, or is not subject to Regulation Z, 12 CFR part 1026, a financial institution complies with § 1003.4(a)(12) by reporting that the requirement is not applicable. If the application did not result in an origination for a reason other than the application was approved but not accepted by the applicant, a financial institution complies with § 1003.4(a)(12) by reporting that the requirement is not applicable.

My thoughts at this point are that we disclosed on our Second Home loans the same way we disclosed on our Primary Residence loans, therefore I am reporting the Rate Spread for funded loans.

Does anyone here have any thoughts about what this Quality check is getting at?

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#2203792 - 01/24/19 02:20 AM Re: Rate Spread and Second Homes HMDA Warrior
Katherine Offline
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Joined: Aug 2017
Posts: 62
I'm getting all kinds of weird quality checks that aren't applicable, but to your point, for us a second home is consumer purpose. The consumer's purpose is for the home to serve as a second home. Because it's consumer purpose it would be subject to TRID and the rate spread would be reported.

Unless you have the second home falling into non-TRID which your documentation and business purpose determination would really need to shore that up. But I can't imagine a borrower indicating the purpose to be second home and then determining it to be business purpose by having it fall within the non-owner occupied rental property of 14 days a year. That would look conflicting and "cute" so for us, second home is consumer purpose.

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#2203795 - 01/24/19 12:47 PM Re: Rate Spread and Second Homes HMDA Warrior
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 78,957
Galveston, TX
"Loan may not be subject to Reg Z and Rate Spread not NA."

It is a quality edit, not a fatal error - it is just saying make sure you have it right. Other than that, you need to ask your HMDA software provider. I assume that all of these are coded 2 for Occupancy Type?
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#2205350 - 02/07/19 03:47 PM Re: Rate Spread and Second Homes HMDA Warrior
HMDA Warrior Offline
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Joined: Jan 2018
Posts: 48
Thank you for the input.

rlcarey - These are all coded 2 for Occupancy.

I have had a follow-up discussion with our software provider and found that this was a Whoopsy! on their part. This was a Quality check from previous years when both 2nd and Investment were coded 2 - Not Primary Residence. This Quality check was not changed and is still triggering for Occupancy code 2, but not for code 3, where it should be.

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#2205407 - 02/07/19 08:55 PM Re: Rate Spread and Second Homes HMDA Warrior
Truffle Royale Offline

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QuestSoft? Because I'm getting the same error.

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#2205492 - 02/08/19 04:16 PM Re: Rate Spread and Second Homes HMDA Warrior
Luv2run Offline
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Joined: Jan 2015
Posts: 469
We also have that issue and use QuestSoft.
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#2205517 - 02/08/19 06:29 PM Re: Rate Spread and Second Homes HMDA Warrior
Truffle Royale Offline

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anyone contacted QuestSoft to ask why? Seems stupid to have it Qedit when it's now required. In fact, imho, it should be a validity error if occupancy is marked 2 and the rate spread isn't there.

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#2205518 - 02/08/19 06:32 PM Re: Rate Spread and Second Homes HMDA Warrior
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 78,957
Galveston, TX
See HMDA Warrior's response above regarding the vendor response
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2205574 - 02/09/19 01:40 AM Re: Rate Spread and Second Homes HMDA Warrior
Truffle Royale Offline

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Warrior never identified the vendor, hence my questions.

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#2206936 - 02/22/19 11:18 PM Re: Rate Spread and Second Homes HMDA Warrior
HMDA Warrior Offline
Junior Member
Joined: Jan 2018
Posts: 48
Sorry for the delayed response. Still working to get our data ready for filing next week!

Yes, this was with QuestSoft. I turned off the Quality check after talking with their customer service.

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#2208450 - 03/12/19 03:08 PM Re: Rate Spread and Second Homes HMDA Warrior
Rebecca W. Offline
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Joined: Feb 2018
Posts: 14
I was also getting the QS05 error from Questsoft. I found out that the reason for it is an alert to have you double check the file. If the loan is an assumption, purchased cover loan or reverse mortgage it is not subject to Reg Z and the rate spread should be NA. (12 CFR part 1026). Since we do not handle any of these types of loans I
turned off the Quality check.

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