TRID - Variable Rate Ceiling

If there is no set ceiling for a consumer variable rate loan, would the rate limit under Usury be considered the ceiling?

If you are not stating a specific ceiling on a transaction that is dwelling secured and subject to TRID, then I suggest you read 1026.30 very carefully.

We are stating a specific ceiling, but it is what they thought was the Usury limit.

Are you referring to an ARM loan?

I am confused as to what the actual question might be then. Are you saying that there is a stated specific rate and it is above your State's usury rate? In your original post you said there was no set ceiling and now you are saying there was a specific rate disclosed.

I didn't give enough context before...

I am reviewing a consumer land only purchase loan. Our internal pricing sheet did not have a rate ceiling/limit for that type of variable rate loan. When reviewing the TRID docs and Note, a ceiling of 18% was disclosed. When I asked the Credit Department about the rate, they said it was the limit under law. However, because I keep up with the usury laws for the state I know that the limit is much higher than 18%. So either they decided on 18% at some point but did not document this decision,
maybe when the limit under law increased, they chose not do increase the limit internally, or maybe they just aren't aware the limit under usury is higher than 18%. But either way, I couldn't find in our own policies/procedures/pricing sheets/guides, etc. this ceiling rate for a consumer land only purchase loan.

For comparison, I reviewed a commercial variable rate loan without a ceiling; besides what would be allowable under state law; to see how this information was being disclosed on the Note.

From what I can see, our loan system requires us to input a ceiling for a consumer land only variable rate loan in the same manner it would for a dwelling secured variable rate loan. I asked to processor to do a test consumer land only loan to see if the system would automatically insert the usury limit (since we have to select the usury law we lend under on the admin side of the system), but the system required a manual input for the rate ceiling.

All this being said, my question is basically - Does a FI have to establish a rate ceiling on all non-dwelling secured variable rate loans or in the absence of a FI establishing a rate ceiling, would it always default to the max rate allowable under state law?

Well, Regulation Z would not require that you include a maximum rate your your loan contract for a non-dwelling secured loan. Whether or not State law requires such is an issue that we cannot answer.

That leaves you with what to do with the Adjustable Interest Rate (AIR) Table under TRID and that is addressed in the commentary:

37(j)(4) Minimum and maximum interest rate.

2. Maximum interest rate. The maximum interest rate required to be disclosed pursuant to § 1026.37(j)(4) is the maximum interest rate permitted under the terms of the legal obligation, such as an interest rate “cap.” If the terms of the legal obligation do not specify a maximum interest rate, the maximum interest rate permitted by applicable law, such as State usury law, must be disclosed.

Thank you so much for that reference and the help!