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CFPB Rate Spread Formula:
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The CFPB (Consumer Financial Protection Bureau) Rate Spread represents the difference between a loan's annual percentage rate (APR) and the average prime offer rate (APOR) for a comparable transaction. It helps identify higher-priced mortgage loans that may require additional consumer protections.
The calculator uses the CFPB Rate Spread formula:
Where:
Explanation: The calculation helps determine if a mortgage loan is considered "higher-priced" under Regulation Z, which may trigger additional disclosure requirements and consumer protections.
Details: Accurate rate spread calculation is crucial for mortgage lenders to comply with the Home Mortgage Disclosure Act (HMDA) requirements and to determine if additional consumer protections apply to higher-priced mortgage loans.
Tips: Enter the loan's interest rate (APR) and the applicable benchmark rate (APOR) as percentages. Both values must be valid non-negative numbers.
Q1: What is considered a "higher-priced" mortgage loan?
A: Generally, a first-lien mortgage is higher-priced if the rate spread is 1.5 percentage points or more above the APOR. For junior liens, the threshold is 3.5 percentage points.
Q2: Where can I find the current APOR rates?
A: The Federal Financial Institutions Examination Council (FFIEC) publishes APOR rates on their website, which are updated weekly.
Q3: Are all mortgage loans subject to rate spread reporting?
A: Rate spread reporting is required for covered loans under HMDA. Certain exemptions may apply based on loan type, lender size, and other factors.
Q4: How often should rate spread be calculated?
A: Rate spread should be calculated for each covered loan application to ensure compliance with HMDA reporting requirements.
Q5: What are the consequences of incorrect rate spread calculation?
A: Incorrect calculations can lead to HMDA reporting errors, potential regulatory violations, and failure to provide required consumer protections for higher-priced mortgage loans.