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#9932 - 02/05/02 05:34 AM HELOC-Historical Sample With Rate Floor
JulesB Offline
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JulesB
Joined: Feb 2002
Posts: 324
A Designated Tree City in OK, ...
I am in the process of updating our historical sample (15 year table) and need some ideas on how to disclose the fact that we have instituted a rate floor for new HELOC's. Our current historical sample uses a margin of 2% above the index (Chase Prime). The current index is 4.75%, but our floor is 7%. Any ideas/guidance out there???
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General Discussion
#9933 - 02/04/02 06:03 PM Re: HELOC-Historical Sample With Rate Floor
SouthoftheBorder Offline
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Joined: Feb 2002
Posts: 335
The South
See Reg Z commentary 226.5b(d)(5)(iii) - I just looked that up......."In the case where the last rate shown in the historical example is diffeent from the index value and the margin (for example, due to rate cap), creditors should calculate the rate by using the index value and margin".
I sense the same would apply to a "rate floor"......

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#9934 - 02/04/02 06:52 PM Re: HELOC-Historical Sample With Rate Floor
JulesB Offline
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JulesB
Joined: Feb 2002
Posts: 324
A Designated Tree City in OK, ...
I'm looking for a way to actually disclose the floor on the historical sample. The commentary doesn't really address it in clear terms.
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#9935 - 02/04/02 07:56 PM Re: HELOC-Historical Sample With Rate Floor
Anonymous
Unregistered

We had this occur several years ago where the rate plus the margin was lower than our floor. We showed the "floor" rate in the example with a footnote indicating that the rate shown in the table was the lifetime floor.

For example:
Year: 19XX Index: 6.000 Margin: 1.500 Annual Percentage Rate: 7.900(1)

Footnote (1) This rate reflects a lifetime floor of 7.9%

The Minimum Monthly Payment was based on the 7.9% APR rather than the index plus margin. Using the index plus the margin would have resulted in understating the minimum payment. I don't know if this is the correct way to show this. But this disclosure was being used prior to my coming here two years ago and has been through at least one OTS exam that I know of since then. It was not questioned or mentioned by the examiners at our last exam. Hope this helps.


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#9936 - 02/04/02 08:00 PM Re: HELOC-Historical Sample With Rate Floor
JulesB Offline
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JulesB
Joined: Feb 2002
Posts: 324
A Designated Tree City in OK, ...
Yes, it does. Thank you. We get examined by the FDIC. Any other thoughts on this from bankers who have the FDIC as their regulator??
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Responses are mine, and are no reflection of my employer.

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