As of October 1, 2009, Higher Price Mortgage Loan (HPML) rules (§ 226.35 of Regulation Z) become effective for all loans with an application taken on or after October 1, 2009. Loans which are classified as higher priced mortgage loans are subject to certain restrictions, fully detailed in Regulation Z.
Defining Higher Priced Mortgage Loans
Higher Priced Mortgage Loans are defined as consumer-purpose, closed-end loans secured by a consumer’s principal dwelling that have an annual percentage rate (APR) equal to or greater than the Average Prime Offer Rate (APOR) by 1.5 percentage points for first-lien loans, or 3.5 percentage points for subordinate-lien loans for a comparable transaction.
Note that the APOR is published weekly (on Friday, to go in effect on Monday) by the federal government, and the two files (one for fixed rates and one for adjustable rates) are available for download here.
Determining if a Loan Falls Under HPML Rules
It is possible to manually determine if a computed loan falls under the HPML rules, however it is a time consuming and error-prone process. It would be much more wise to automate the HPML rules, so that each and every one of your applicable loans can be checked quickly and accurately.
Thankfully, this new functionality has been implemented within the SCEX and is available in our latest release. Using the SCEX, you can determine if a loan computed by the SCEX (as well as a loan computed outside of the SCEX) falls under the new HPML regulations. The SCEX also returns the APOR used in the calculation, the date that APOR is in effect, the spread used (either 1.5% or 3.5%), and the difference between the APR and APOR plus spread.
Of course, the APOR files which are used in the calculation need to be updated on a weekly basis. If they are not updated, then the SCEX will not be able to determine if a loan is a HPML for loans whose lock in dates fall outside the range of dates provided in the APOR files.
We have received a request to provide the service of downloading the weekly files and sending them to individual partners for inclusion in their systems, and we are willing to provide that service to all who desire it. Please contact our technical support team for further information on this service, or additional HPML information.