I'm trying to determine if the APR and FC were calculated correctly on the final TIL. The borrower had PMI over the first 140 payments. I cannot figure out how to do this on the OCC's program since the PMI payments would be a subsequent FC and the OCC's program doesn't have this option except for on IC APR's. Do we need to purchase a software such as TValue or something similar to determine the calculation? I've tried to do this on my HP and I can come up with the interest, but I'm lost in trying to determine the GAP on the interest and the total FC disclosed on the TIL. The finance charge disclosed on the TIL should include all of the payments towards PMI correct?---plus of course PPFC's.

While trying to figure this out I'm assuming that PMI payments are constant over the 140 payments--is this correct? If not, how does anyone audit these correctly without a full escrow page for the term of 140 payments. I probably just confused the issue because I'm confused myself. Can anyone give me some advice on this. Thanks.

You need to enter the payment stream including the PMI payment into the APRWIN program. If the PMI payments vary monthly, then you are going to have to enter all 140 payments separately in order to use this program. If they do not vary, then on a fixed rate loan you would have 140 at one amount and then another payment stream for the remainder of the term at just the P&I.

I guess that means we have to have the full escrow for each month for 140 payments to determine if all payments are the same. We have the first year's worth of PMI payments and that is it. However, I thought most all PMI payments were the same amount each month---is this incorrect? I'm getting an understated FC and I can't figure out why. Possibily the payments decrease the last few payments so I need to find out the entire amoritization schedule for the PMI. Our attorney prepared the final TIL. Is there an additional area that you can think of that I should be checking? There is a cushion on the first year escrow statement, but since the payments are set at 140 before they change I'm assuming the cushion will be reimbursed. Should the cushion be part of the finance charge--perhaps this is where an error could have happened? Thanks for your help on this one.

Before you can calculate the APR you must verify the AF and payment schedule. Unless you have to sift through lots of junk fees to pick out those which must be treated as PFCs, the AF's relatively easy to calculate.

The payment schedule's much harder since there can be several "layers" to recalculate. The base layer is usually the P&I at the note rate. Additions and subtractions due to a variable rate's discounts or premiums will cause a layer of steps. PMI premiums are another layer. Typically, MI renewal premiums are calculated as a percentage of the original loan amount. As the loan pays down, this percentage may decline annually or in multi-year intervals. Eventually, the loan reaches the point of termination mandated by the Homeowner's Protection Act. At this point, the MI renewal premiums go to $0.00 for the remainder of the loan. If you can't determine the total picture for MI renewal premiums, discuss it with the loan servicing manager.

After you've verified the layers, stack them up and turn them into a disclosure. It could have several groups of payments of widely varying amounts.

Using the exact payment schedule and a correct AF, APRWIN will give you an accurate APR for closed end loans with any number of features. It appears to calculate the FC also, but the result is no better than your classification of the PFCs.