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#2233214 - 03/18/20 03:25 PM APR calculation for ARMs
FSLICBanker Offline
Member
Joined: Apr 2008
Posts: 90
North Carolina
Good morning. Can anyone direct me to a good software tool that I can use for the initial calculation of APRs and Finance Charges for ARMs. I'm still currently using my 20+ year old HP 12-C.

Also, I'm having difficulty backing into the APR and FC on a 5.08/5.08 ARM that has already been originated. Yes, the Note and Program Disclosure state that the rate will not change for the initial 61 months and will change every 61 months after that. Payment change will correlate to rate change.

Index value was 2.48 with a margin of 2.75 with a calculated rate of 5.23 rounded to 5.25%. Loan was for $300K with 4% initial note rate with 30 year term. I calculated an initial stream of $1,432.24 for my first 61 payments. After amortizing the first 61 payments I was left with a principal of $270,815 from which I then calculated a payment of $1,625.48 for the remaining 299 payments based on the 5.25 fully indexed rate.

The significant variance between my calcs and those on the CD are leading me to second guess my methodology. My calcs are coming in at much less than those on the CD so everything disclosed appears materially overstated. Any thoughts? Hope everyone is safe and sound.

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#2233215 - 03/18/20 03:44 PM Re: APR calculation for ARMs FSLICBanker
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,649
Galveston, TX
Not sure how you are doing an APR calculation on a HP-12C.

I would be using APRWIN from the OCC to validate APRs.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2233217 - 03/18/20 04:05 PM Re: APR calculation for ARMs FSLICBanker
FSLICBanker Offline
Member
Joined: Apr 2008
Posts: 90
North Carolina
Sorry Ron. I am using the OCC program to validate APRs and FCs but am using my HP 12C to calculate the multiple payment streams for this ARM.

The bank's disclosed APRs are normally 60 to 75 bps above mine so they must be arriving at a higher fully indexed rate that perhaps leads them to use more than the 2 payment streams I used above. Per the Note, the annual caps are 2% which should not come into play as the fully indexed rate of 5.25 is only 1.25% greater than the initial discounted note rate of 4% or perhaps the bank is not amortizing the initial payment stream at the 61 months set forth in the Note and is amortizing the discounted payments for only 12 months or some other shorter period of time. Ahh, the compliance intrigue.

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#2233221 - 03/18/20 04:18 PM Re: APR calculation for ARMs FSLICBanker
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,649
Galveston, TX
Well, lenders are required to maintain all information to reproduce the disclosures under 1026.25, which would include the amortization schedules used to calculate the APR. If you don't have those, then you are flying blind as to what the problem might be.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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