[kcco]

Currently the rate spread is figured using the final APR. I am reading in 2018 to report NA for loans NOT subject to REG Z and applications not resulting in an origination “other than approved but not accepted”. For those applications, we are to “rely on the annual percentage rate for the application or preapproval request, as calculated and disclosed pursuant to REG Z”. So here is the problem. What if we approve someone at time of application and they call back the next day to withdraw the request, all within the 3 days pursuant to REG Z to prepare the disclosures. We have no disclosures to prepare the rate spread. What then? What do we report?

[rcooper]

You would report the difference between the APR of the Covered Loan that would have resulted had the applicant accepted it and a comparable transaction’s APOR as of the date the interest rate was set.

[kowsley]

In this scenario, you need to determine first, is it a withdrawal or is it approved but not accepted. Did you communicate the “approval” to the customer prior to withdrawal by the customer? If it was not communicated to the customer then rate spread would be reported as “NA” because the transaction would be considered withdrawn. If the approval was communicated at application prior to the customer withdrawing, then the bank will have to calculate the rate spread which will require a calculation of an APR. If an APR isn’t calculated until disclosures are developed, then at least enough data entry would have to be completed to get an APR to calculate a rate spread. A time consuming task just to report a rate spread.

[kowsley]

Under the final amendments to HMDA released on 8/24/17, this specific issue is addressed. See pages 195-196 in the HMDA final amendments – Application approved but not accepted: “For transactions subject to Regulation C for which no disclosures under Regulation Z are required, a financial institution complies with 1003.4(a)(12)(i) by reporting NA.

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