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#2265096 - 01/24/22 07:57 PM HELOC Rate Spread
jel99 Offline
Junior Member
Joined: Sep 2021
Posts: 27
Are Rate Spreads reportable on consumer open-end lines/HELOC's? This is our first year reporting and I am having trouble interpreting research into a simple answer.

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#2265098 - 01/24/22 08:16 PM Re: HELOC Rate Spread jel99
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,898
Galveston, TX
3. Rate spread calculation—annual percentage rate. The requirements of § 1003.4(a)(12)(i) refer to the covered loan's annual percentage rate. For closed-end mortgage loans, a financial institution complies with § 1003.4(a)(12)(i) by relying on the annual percentage rate for the covered loan, as calculated and disclosed pursuant to Regulation Z, 12 CFR 1026.18 or 1026.38. For open-end lines of credit, a financial institution complies with § 1003.4(a)(12)(i) by relying on the annual percentage rate for the covered loan, as calculated and disclosed pursuant to Regulation Z, 12 CFR 1026.6. If multiple annual percentage rates are calculated and disclosed pursuant to Regulation Z, 12 CFR 1026.6, a financial institution relies on the annual percentage rate in effect at the time of account opening. If an open-end line of credit has a variable-rate feature and a fixed-rate and -term payment option during the draw period, a financial institution relies on the annual percentage rate in effect at the time of account opening under the variable-rate feature, which would be a discounted initial rate if one is offered under the variable-rate feature. See comment 4(a)(12)-8 for guidance regarding the annual percentage rate a financial institution relies on in the case of an application or preapproval request that was approved but not accepted.

4. Rate spread calculation—comparable transaction. The rate spread calculation in § 1003.4(a)(12)(i) is defined by reference to a comparable transaction, which is determined according to the covered loan's amortization type (i.e., fixed- or variable-rate) and loan term. For covered loans that are open-end lines of credit, § 1003.4(a)(12)(i) requires a financial institution to identify the most closely comparable closed-end transaction. The tables of average prime offer rates published by the Bureau (see comment 4(a)(12)-2) provide additional detail about how to identify the comparable transaction.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2265113 - 01/24/22 10:49 PM Re: HELOC Rate Spread rlcarey
jel99 Offline
Junior Member
Joined: Sep 2021
Posts: 27
To clarify, HELOC's do require a calculated rate spread and not "NA", unless it is a reverse mortgage?

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#2265120 - 01/25/22 12:02 PM Re: HELOC Rate Spread jel99
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,898
Galveston, TX
Yes. For open-end lines of credit, a financial institution complies with § 1003.4(a)(12)(i) by relying on the annual percentage rate for the covered loan, as calculated and disclosed pursuant to Regulation Z, 12 CFR 1026.6.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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