Please Help Me Get This Through My Thick Skull

Effective with loan applications taken on or after 10/01 and for loans that close on and after 01/01/2010, we will be calculating rate spread using the new average prime offer rate. I do get that much!!

BUT, do we still have to conduct the old rate spread calculation in order to determine whether HOEPA applies? Or, for reporting is the HOEPA Status then "n/a"?

I think I can't see the forest for the trees.....

The HPML and the new HMDA rate spreads will be based on the AOPR, the HOEPA rate spread will continue to be calculated on the treasury securities (unless I missed something) so it will be necessary to perform both calculations.

As an example let's say for a first lien 30 year loan the AOPR is 5.75 and the 30 year treasury security is 4.125 and your APR is 7.375. Your HMDA rate spread will be 1.625 (> 1.5%) and your HOEPA rate spread will be 3.25 (= < 8%) so the HOEPA status would be 2.

For whatever reason lets say your APR was 12.250. The HMDA spread would be 6.500 and the HOEPA spread would be 8.25 (> 8%) therefore you would report the HOEPA status as 1.

Dan's right but I just want to add: HPML and HOEPA are two different things. You can have a loan that is HOEPA but not a HPML (because of non-FC fees), or subject to HPML but not HOEPA, or both.

Just going to say this another way to make sure I've got it. On or after 10/01, the LAR reported rate spread will always be the new one calculated based on the AOPR.

Since we must still report HOEPA Status as 1,2 or n/a, we will also perform the old calculation for purposes of that data field on the LAR only (keeping in mind that HOEPA does not apply to purchase-money mortgages).

Do I have it?

That's correct for applications received on or after 10/01/09. Applications received before 10/01/09 and closed on 12/31/09 or before will still be based on the treasury maturities so you will need to use the old calculator.

For loans closed on or after 01/01/10 you will use the new calculator (AOPR) for all applications regardless of when they were received.



HOEPA status on the LAR will always be a 1 or a 2. There is no NA option. The rate and fees calculation for HOEPA under Sec 32 of Reg Z has not changed.

Keep in mind you could have a HOEPA loan due to the fees and not the APR; therefore you wouldn't have a HOEPA rate spread but you would have a HOEPA loan to be reported on the LAR.