There are several regulatory requirements and even definitions that are dependent upon a rate spread threshold; namely, qualified mortgages (QMs), high-cost mortgages (HCMs) and higher-priced mortgage loans (HPMLs). While the specific qualifications may differ slightly, they all require using the average prime offer rate “as of the date the interest rate is set”. We see errors with this “rate set date” quite often. The reason is that financial institutions try to make it easy. For example, they might say that the rate set date always occurs at a certain point during the loan process; for example, when disclosures go out. While that may be the case most of the time, there will undoubtedly be instances where it’s not the case or the rate changes after that point in time. When that happens, the rate set date for purposes of determining whether the loan is an HPML, HCM, etc. will be different. Errors with your rate set date may cause you to miss that you have an HPML or lead you to believe you have a QM and it can even cause problems with other requirements like HMDA.
Kevin explains more in the video.
Published
2024/03/14