I had a question asked to me about PMI and APR by a co-worker that I could not answer because I've never had any experience with PMI. And I'm having trouble finding information about this. Do any of you know if PMI affects APR and what circumstances do affect APR?

My understanding --- PMI is a finance charge and will affect the APR.

From the regs -
Reg Z 226.4 (b) Example of finance charge. The finance charge includes the following types of charges, except for charges specifically excluded by paragraphs (c) through (e) of this section: . . . .
. . . (5) Premiums or other charges for any guarantee or insurance protecting the creditor against the consumer's default or other credit loss.

Private mortgage insurance protects the lender, and the premium amounts (paid by the customer at closing or calculated as part of the payments) are included in the TiL/APR calculations.

If the borrower is paying the premiums, PMI is always a FC and always increases the APR. You must include PMI premiums paid at settlement (including escrowed premiums) and all renewal premiums you will collect through the date the Homeowners Protection Act requires you to terminate the PMI. Usually, there will be one or more reductions in the monthly premium amounts as the loan pays down.

I am looking at a loan today that has PMI.
Fed Box: APR 6.602, Fin Chg 117,586.12, Amt Finc 92,839.08, Total of pymts $210,425.20
Our payment streamed disclosed is 574.19 x 360 = $206,708.40. When I run these numbers through the OCC calculator I have a violation.
The difference is because the pmi is 41.74 x 89 months = $3714.86.
I know something is wrong, I just don't know what.
Did we need to disclose the pymt stream as 89 @ 615.93, 271@ 574.19? Those figures give me an APR violation also. What am I missing here?

You should have two payment streams. The first payment stream would include the P&I payment plus the PMI monthly payment through the termination date of the PMI, the second payment stream would be the remaining number of P&I payments. You have a violation and are probably looking at a healthy reimbursement - I also advise you sample more loans with PMI to make sure this is an isolated incident. If it's not you are headed for some "fun".

That is what I was afraid of, but then I started second guessing myself. Thank you for the help.

You should probably check with your counsel before going too far. From the info you provided, it looks like the APR, Finance Charge, and Total of Payments are all accurate (or well within the tolerance). (I ran it on the OCC's APR checker, assuming 30 days to first payment.) The only thing that's inaccurate is the payment schedule. That will affect how you handle the interaction with the borrower. You didn't say whether this was a loan that was just put on the books, or has been out there a while with borrower making payments.