Section 35 HPML

Use the Section 35 HPML form to determine whether a loan exceeds the threshold for Section 35 Higher-Priced Mortgage Loans. The fields in the top section of the form should already be completed based on entries in other forms, but you can change the dates or select a new loan program as needed.

 The Section 35 HPML Threshold test is different than the Section 43 Higher-Priced Covered Transaction (HPCT) Threshold Test. Refer to Chapter 4, “Using Encompass to Document Compliance with HOEPA and Ability-to-Repay” for additional information on HPCT requirements.

To Determine Whether the Loan Exceeds the Section 35 HPML Threshold:

  1. If not already entered, enter the Application Date.

  2. Click the View Rate button.

  3. When the NEW FFIEC Rate Spread Calculator window opens, click one of the links in the Average Prime Offer Rates Tables section to open a spreadsheet for fixed or adjustable rates.

  4. The top row in the spreadsheet lists the Term of Loan. Locate the column that contains the Term of Loan for your loan.

  5. The left column lists dates. Locate the row with the date that matches (or directly precedes) the Rate Lock Date for your loan.

    • The Average Prime Offer Rate (APOR) for your loan is listed at the intersection of the row and column you located above. Example: For a fixed loan with a term of 7 years and a Rate Lock Date of 1/4/2000, the average Prime offer Rate is 7.47.

  6. Back on the Section 35 HPML form, enter the rate in the Average Prime Offer Rate field.

    • Encompass will calculate the result and determine whether the loan does or does not exceed the threshold.

  7. Use the HPML Appraisal Requirements section to determine if a second appraisal is required for the loan according to Dodd-Frank Act requirements (effective January 18, 2014).

    • Second Appraisal Required- This field is calculated to meet the requirements set forth in the Consumer Financial Protection Bureau’s (CFPB) final rule to amend Regulation Z jointly with the Federal Reserve Board, FDIC, FHFA, NCUA, and OCC and implement a new provision requiring appraisals for “higher-risk mortgages” that was added to TILA by the Dodd-Frank Act. This final rule is effective starting January 18, 2014.

    • If the current Sales Price (field ID 136) exceeds the Prior Acquisition Price (field ID 3854) by more than 10% AND the Prior Acquisition Date (field ID 3853) is 90 days or less than the Sales Contract Date (field ID 3855), the loan DOES require a second appraisal.

    • If the current Sales Price (136) exceeds the Prior Acquisition Price by more than 20% AND the Prior Acquisition Date is 91-180 days or less than the Sales Contract Date (field ID 3855), the loan DOES require a second appraisal.

    • If the above conditions are not met or if the Sales Contract Date (field ID 3855) occurs before the Prior Acquisition Date (field ID 3853), the loan DOES NOT require a second appraisal.