I was in a bank this past week and discovered a loan which on the surface appeared to be a Higher-priced Mortgage Loan (HPML). This loan was secured by a first lien, had a term of five years, an APR of 5.537%, and the rate was locked January 10th
When I input this information, specifically the APR, into the FFIEC rate spread calculator (exactly as it appeared on the Truth in Lending disclosure – 5.537), I got a rate spread of 1.50% indicating that the loan was a HPML. However, if I input the APR as 5.53, the FFIEC calculator indicated “NA” meaning the loan was not an HPML. While this may seem like an insignificant detail, it does have the potential to cause compliance problems not only with TIL requirements but also with HMDA reporting.
A little research resulted in the following (found at the “help” link of the FFIEC rate spread calculator):
Annual Percentage Rate (APR)
APR should be entered in percentage format and data entered should be in the range 00.00 to 99.99%. For example, an APR of 4.875% should be entered 04.88, including all leading and trailing zeros. If the figure is more than two decimal places, round the figure or truncate the digits beyond two decimal places.
This is pretty clear that bank has the option to either round the number up or truncate the digits beyond two decimal places. Thus, depending on the input method you choose, you may or may not have a HPML. Also keep in mind that your examiners may be inputting the information differently than you. Therefore, you may need to educate them.
The best tip I can offer is this…whatever option you choose, make sure that you apply it consistently across the board. This approach will also ensure consistent reporting for HMDA purposes.