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:
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If not already entered, enter the Application Date.
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Click the View Rate button.
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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.
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The top row in the spreadsheet lists the Term of Loan. Locate the column that contains the Term of Loan for your loan.
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The left column lists dates. Locate the row with the date that matches (or directly precedes) the Rate Lock Date for your loan.
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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.
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Back on the Section 35 HPML form, enter the rate in the Average Prime Offer Rate field.
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Encompass will calculate the result and determine whether the loan does or does not exceed the threshold.
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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).
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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.
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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.
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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.
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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.
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