Real Estate Consumer Loans

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Question:

In cases of our real estate consumer loans, the final rate is set at the time of application. Do you feel that it would be appropriate to have the rate spread run at the time of application rather than waiting until we are preparing for the closing?

Answer:

Once you set the rate, it is wise to see if the loan will be close to being a HPML. However, you can't technically know for sure until the get closer to closing (or even the day of) as you must compare the final APR to the APOR+Margin. If something changes, the final APR may also change. If you compare the rate spread at the time of application and it is or close to being a HPML, you can ensure the loan officer has the proper documentation and prepare the escrow requirements, rather than be shocked at closing.

First published on BankersOnline.com 8/30/10