Rate Spread Calculator

As promised, the CFPB has released an updated Rate Spread Calculator. This calculator is to be used for consumer purpose, HMDA reportable loans with Dave11an action date in 2018. It also applies to applications that are recorded as “Approved, by Not Accepted” in 2018. Continue to use the prior rate spread calculator for loans closed in 2017.

To help you understand these requirements, the following is from our HMDA training manual:

Report the rate spread (as of the date the interest rate was set) between the APR and the “Average Prime Offer Rate”. [§1003.4(a)(12)(i)] If the loan/line is not subject to Regulation Z or not originated (except approved but not excepted) enter “NA”. [Commentary to §1003.4(a)(12) #7]

  • a. Reporting a Rate Spread:

Enter the rate spread as a positive or negative number rounded to at least three decimal places. [§1003.4(a)(12)(i)]

  • b. Rate Set Date

The relevant date to use to determine the average prime offer rate for a comparable transaction is the date on which the interest rate was set by the financial institution for the final time before final action is taken (i.e., the application was approved but not accepted or the covered loan was originated). [Commentary to §1003.4(a)(12) #5]

  • c. Rate Lock Agreement:

If an interest rate is set pursuant to a ‘‘lock-in’’ agreement between the financial institution and the borrower, then the date on which the agreement fixes the interest rate is the date the rate was set (unless reset or extended). [Commentary to §1003.4(a)(12) #5(i)]

  • d. No Rate Lock Agreement:

If no lock-in agreement
is executed, then the relevant date is the date on which the institution sets the rate for the final time before closing or account opening. [Commentary to §1003.4(a)(12) #5(i)]

  • e. Brokered Loans/Lines:

When a financial institution has reporting responsibility for an application for a covered loan that it received from a broker… (e.g., because the financial institution makes a credit decision prior to closing or account opening), the rate-set date is the last date the financial institution set the rate with the broker, not the date the broker set the borrower’s rate. [Commentary to §1003.4(a)(12) #5(iii)]

  • f. Approved but Not Accepted Applications:

In the case of an application approved but not accepted or a preapproval request that was approved but not accepted, §1003.4(a)(12) requires a financial institution to report the applicable rate spread. [Commentary to §1003.4(a)(12) #8] Utilize the APR disclosed on the last set of disclosures provided. If no disclosures were provided, report N/A. [Commentary to §1003.4(a)(12) #8]

  • g. Corrected Closing Disclosures (Post Closing):

…if the financial institution provides a corrected disclosure to the borrower… that reflects a corrected annual percentage rate, the financial institution reports… the rate spread using the corrected APR and the corresponding APOR … as of the rate-set date if the corrected disclosure was provided to the borrower prior to the end of the calendar year in which final action is taken.
 [Commentary to §1003.4(a)(12) #9]

Check out our new article on what HMDA and Non-HMDA Bankers need to know about the new rate spread calculator.

David Dickinson

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