I am hoping someone will be able to help me with a few questions that I have regarding HEOPA.

1. What do you do when you have a 4- or 6-year loan when looking to compare it to the Treasury Security rate? I'm only finding 3, 5, 7 term rates.

2. How is everyone going to prove the customer has been given the disclosure? Having the customer sign it doesn't work if you are mailing it and they don't return the disclosure. What if the borrower comes in but not the co-borrower? How are you handling the proof of these types?

3. Are you checking all Residential Mortgage transactions for HOEPA or just loans with crdit life insurance?

Thanks for any feedback given!

In reply to:

---

1. What do you do when you have a 4- or 6-year loan when looking to compare it to the Treasury Security rate? I'm only finding 3, 5, 7 term rates.

---

Use next shortest term rate, on 4 year loan, use 3 yr rate.

In reply to:

---

3. Are you checking all Residential Mortgage transactions for HOEPA or just loans with crdit life insurance?

---

HOEPA does not apply to RMT as that term is defined --- purchase money transaction. Applies to loans in which the customer is using the "equity" in their home as collateral for another loan.

At least this is the way I understand it. I have been working on this off & on all month, and pretty much all the time this week. I still have questions and the Fed example is confusing me even more. Oh, how I wish I had been a lending person rather than an operations person before getting into compliance.

1. You are to use the term closest to your maturity. If it is in the middle, you use the lower term yield, i.e. a 4-year loan would use the 3-year yield.

2. We will document the file with the date we mailed the notice, just as we do with the GFE & Early TIL, and we will require them to return the notice before setting a closing date. Fortunately, to date, none of our loans have even come close to meeting HOEPA, and even with the lower tolerances we still will not have a high risk of hitting HOEPA Disclosures, so we will be very strict on the ones that may it HOEPA.

3. We will only check loans that have credit insurance, which will be very few for us. (CAnderson is correct in that HOEPA does not apply to RMTs (purchase and/or construction loans.)

Okay - I have a question when looking at the Treasury Security Rate, which one am I looking at?

We have 15 year Home Equity Product, so I would have to look at the 10 year rate. BUT, when I go to the the FRB website for the rates FRB - HR 15

There are TWO listings with 10 year maturities:

There is the Treasury Constant Maturities 11, and there is the Treasury Long Term Average Interest Rate Swap 14.

For instance, for applications received this month, I would look at the rates on August 15th:
According to the Statisical Release H.15, the rate for Treasury constant maturities 11 for 10 years is 4.17.
The rate for the Treasury long-term average for 10 years is 4.75.

I looked at 12 CFR 226.32 and related commentary, but it doesn't give a SPECIFIC reference. It just says to look at the yield on a Treasury Security. The commentary references the Federal Reserve Board's Selected Interest Rates (statistical release H-15), but doesn't really give much guidance beyond that.

Wouldn't it be nice if they would just post a $##* BENCHMARK figure on the 15th of each month? (or immediately preceding workday if the 15th is on a weekend or holiday.) The benchmark can say - This is the benchmark figure for calculating the APR Test for 12 CFR 226.32, and then give the different maturity dates.

But, I suppose, that would be too easy?

Use the Treasury Constant Maturities 11 and use the daily rate, not the weekly average. Just a reminder, if your home equity product is a HELOC, HOEPA doesn't apply.

Thanks for the tip. And not to be argumentative, but out of curiousity, can you tell me where that instruction comes from?

It came from a workshop sponsered by the Indiana Bankers Association and conducted by Pegasus Educational Services, LLC out of Louisville, KY.

And, if the 15th is on the weekend, do we use Friday or Monday rate?

Bonnie,

I think it's pretty specific when you stop and think about it. It does say Treasury securities and does not mention interest rate swaps (two very different animals) and it refers to the yield as of the fifteenth of the month, without mention of averages.

If the 15th falls on a weekend or holiday, you use the first business day preceding the 15th. (For the H-15 business days are Mon. thru Fri. the days they hold the auctions.)

rlcarey - my main problem is I never really paid attention to that sort of stuff - until now. So I am unfamiliar with the differences. And many unitiated folks would be confused when they go to HR-15 and see TWO different listings for a 10 year maturity.

It would just be nice if the Commentary would say, SPECIFICALLY, which figure (and name the exact name of the item) we are to look at. Or even better, the FRB should simply publish a Section 32 Benchmark rate based on the Treasury Security info. That way, there would be no doubt of what I am looking for.

All I know is that we price our loans low enough so that, even using the 8 percent cap under California law, the Treasury Yield would have to fall below a .50% before I need to become concerned.

Speaking of California law, the DFI will now require a board approved policy regarding compliance with the California version of Anti-Predatory Lending. This is what really prompted my question in that I need to put a specific reference in our policy and/or procedure.

Bonnie, if my memory recalls correctly, and I'm too lazy to look it up right now, when the new HMDA regs go into effect for the yield spreads, the FFIEC is going to post the benchmark on thier web site.

That's not until 04!