As we mentioned in our December 28th blog, the CFPB released a new Rate Spread Calculator for 2018 HMDA-LAR data reporting. Unfortunately, this new calculator has already been causing
confusion for both HMDA and non-HMDA banks alike. There are a couple of important differences between the new rate spread calculator and the previous version:
First, there is NO field to input Lien Status. For HMDA banks, the Lien Status (or HPML status) has no bearing on the rate spread being reported on the 2018 HMDA-LAR. You simply enter the date the rate was set, the APR and the term of the loan and then report the rate spread that’s given (whether it’s positive, negative or zero). Having no field to input Lien Status also means that the new rate spread calculator will NOT calculate HPML status, at least not directly. This affects both HMDA and non-HMDA banks.
The old calculator would indicate “NA” for non-HPML loans and would only give a rate spread if the loan was an HPML. So, you must retrain your brain that just because you get a rate spread doesn’t necessarily mean the loan is an HPML! Determining HPML status is now a more “manual” process. You will just have to remember that if the calculated rate spread number results in 1.50% or more for a first lien, or 3.5% or more for a subordinate lien, you have an HPML and additional requirements and restrictions will/could apply!
Consider the following example:
- 15-year term, 1st lien
- Fixed rate of 4.75% was set on 12/22/17
If you input this information into the old FFIEC Rate Spread Calculator, it gives a result of “NA” because the rate spread between the APR and APOR was not 1.50% or more (first lien).
FFIEC Rate Spread Calculator
To calculate rate spreads for HMDA reportable loans, use a different calculator depending on the final action date:
- Use the new calculator available on the CFPB website if final action was taken on or after January 1, 2018.
- Use the calculator below if final action was taken between January 1, 2010 and December 31, 2017.
- Use this calculator if final action was taken before January 1, 2010.
Rate Spread Calculator for final action taken between January 1, 2010 and December 31, 2017
The rate spread calculator generates the spread between the Annual Percentage Rate (APR) and a survey-based estimate of APRs currently offered on prime mortgage loans of a comparable type utilizing the “Average Prime Offer Rates” fixed or adjustable table, action taken, amortization type, lock-in date, APR, fixed term (loan maturity) or variable term (initial fixed-rate period), and lien status. Rate spread is a calculated field and is NOT simply the APR on the loan application.
A batch rate spread calculator is also available to allow institutions to calculate the rate spread on multiple Loan Application Registers (LARs).
 Do not use the rate spread calculator to calculate the HOEPA status; they are two different fields which require two different calculations. See Help for more details.
 Effective July 7, 2016, APORs will be calculated using data from a combination of Freddie Mac’s Primary Mortgage Market Survey and HSH Associates’ survey data. View a table of the data and its sources.
If you input the same information into the new Rate Spread Calculator, it gives a rate spread of 1.320. If you’re a HMDA bank, this is what you will report on your 2018 HMDA-LAR. For HPML purposes (HMDA & non-HMDA banks), this loan is NOT a HPML, because the spread was not 1.50% or more (first lien).
Rate Spread Calculator
This calculator provides rate spreads for HMDA reportable loans with a final action date on or after January 1st, 2018. Use the prior rate spread calculator for loans with a final action date before January 1st, 2018.
The rate spread calculator generates the spread between the Annual Percentage Rate (APR) and a survey-based estimate of APRs currently offered on prime mortgage loans of a comparable type utilizing the “Average Prime Offer Rates” fixed table or adjustable table, action taken, amortization type, lock-in date, APR, fixed term (loan maturity) or variable term (initial fixed-rate period), and reverse mortgage.
Data requirements for the rate spread calculator are provided in accordance with Regulation C effective January 1st, 2018.
If you’re NOT a HMDA bank, you may be thinking to yourself, “well I’ll just continue using the previous rate spread calculator so it will tell us “NA” if it’s not an HPML. Unfortunately, that won’t be an option once your “rate set date” is on or after January 1, 2018, and you will receive an “Invalid Parameter(s)” error message.
The second area of confusion has to do with the calculator instructions. The previous calculator instructions say, “Use the new calculator available on the CFPB website if final action (loan closing) was taken on or after January 1, 2018”. While it may be a moot point now that we are in 2018, that’s not exactly accurate. You could have a loan with a final action date after January 1, 2018, for which the rate set date was back in 2017. The old calculator will still work because it’s based on the date the rate was set, not when the final action date occurred. So, if your rate set date was prior to January 1, 2018, you could still use the old tool, but that is only for a short period of time. We recommend you start training your people on how to use the new rate spread calculator ASAP!
Deb joined Banker’s Compliance Consulting with twenty years of experience in the banking industry. Her past positions include teller, credit review analyst, assistant financial officer, BSA Officer, Compliance Officer, and Director of Compliance. She has worked for both a small community bank and a large billion-dollar bank.
Deb has Associate Degrees in Business Management and Accounting. She is a graduate of the American Bankers Association National Graduate School of Compliance Management, an honors graduate of Schools of Banking Compliance School, and a graduate of Schools of Banking Advanced School of Banking. Deb’s considerable knowledge and experience make her a valuable member of the Banker’s Compliance Consulting Team. Deb is a Certified Regulatory Compliance Manager (CRCM) and a Certified Anti Money-Laundering Specialist (CAMS).
Deb loves to spend her free time cycling, running, kayaking and weight lifting with her husband. Between them, they have three adult children and six grandchildren. Other interests include anything outdoors and anything she hasn’t done or seen yet!