[sgarcia01]

I’m having a little confusion on this topic. I have a 12 month interest only loan that is not considered to be temporary. The rate for the entire loan is variable which is prime daily + 1%. The loan does not have a Intro/teaser rate. My software is forcing a 1 instead of NA. Upon reading the small entity guide it states that you would report NA for this field if the loan is a fixed rate loan. However, this loan is not fixed. Also, there is a paragraph in the small entity guide that states that a financial institution should report the number of months based on when the first interest adjustment may occur even if the adjustment is not required to occur. Also, if it is less than a month report 1. This example makes it appear that I should be reporting at least 1 even though I do not considered this loan to have an introductory rate period. Please help. I don’t believe the small entity guide or the reg defines clearly what an introductory rate period is.

[jholzknecht]

I am in complete agreement that the CFPB has not clarified what qualifies as an “introductory rate.” In the past the term has generally referred to a “teaser” rate, which is rate lower than the rate determined by using the index and margin used for later rate adjustments. The HMDA rules requires reporting of the number of months based on when the first interest rate adjustment may occur, whether that rate is a teaser rate or not. Comment 4(a)(26) includes the statement, “Assume an open-end line of credit contains an introductory or “teaser” interest rate…” The statement appears to refer to a “teaser rate” as an example, but not an exclusive example, of an introductory rate.

[tressa]

So if the covered HMDA loan is 12 months interest only – variable rate (1% above 4.75-WSJ) – no introductory or teaser rate – and the interest rate can change daily – the following data points should be reported:

Interest Rate – enter 5.750 – the fully indexed rate
Introductory Rate Period – enter 1 – rate is variable and can change daily

Do you agree?

[Author]

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