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#2258591 - 08/24/21 03:20 PM HMDA - Introductory Rate Period when floating?
Help! Compliance Offline
Member
Joined: Oct 2012
Posts: 88
San Antonio, TX
I do not see floating rate situations addressed in the regulatory guidance for reporting the Introductory Rate Period. We have some HMDA reportable loans sourced out of our Commercial Lending area, and many times the associated rate is floating with no introductory rate period. Are we to treat these as we do those with Fixed Rate terms (NA), or are we to report "1"? Also, we may have some that have extension options built in...Example: The loan has a 5 year term (initially floating), but after 3 years, one has a couple rate options for year 4 (floating vs fixed) and again for year 5. One may immediately want to say to report 36, but even initially, it is floating.

Thank you so much for your help with this...

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#2258617 - 08/24/21 07:05 PM Re: HMDA - Introductory Rate Period when floating? Help! Compliance
Inherent_Risk Offline
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Joined: Jan 2017
Posts: 373
I'm guessing based on context here that when you say floating, you mean the initial rate set, but it can change at any time based on something happening (most likely a change in index). In that case, the intro period should 1. The first date the the interest rate may change would be the day of closing, which is less than one whole month.

1003.4(a)(26)The number of months, or proposed number of months in the case of an application, until the first date the interest rate may change after closing or account opening.

5. Non-monthly introductory periods. If a covered loan or application includes an introductory interest rate period measured in a unit of time other than months, the financial institution complies with § 1003.4(a)(26) by reporting the introductory interest rate period for the covered loan or application using an equivalent number of whole months without regard for any remainder. For example, assume an open-end line of credit contains an introductory interest rate for 50 days after the date of account opening, after which the interest rate may adjust. In this example, the financial institution complies with § 1003.4(a)(26) by reporting the number of months as “1.” The financial institution must report one month for any introductory interest rate period that totals less than one whole month.

Generally, when I hear a rate is floating, it means before origination and the initial rate has not been set, which doesn't really have an effect on the intro rate period.

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