Rate Spread Calculator
The Rate Spread Calculator within the RATA Comply Suite was developed to assist institutions with the Regulation C requirements for reporting HMDA Rate Spread data. Since 2004, when the reporting of Rate Spread was first introduced, three different processes have been used for the calculation.
- Beginning in 2018, the spread is calculated between the Annual Percentage Rate (APR) and the "Average Prime Offer Rates". There is no longer a distinction that it only be reported when exceeding a given threshold. In cases where the spread should be reported, it is always reported whether negative or positive, to a minimum of 3 decimal places of precision.
- In the Q4 2009-2017 timeframe, the spread was calculated between the Annual Percentage Rate (APR) and the "Average Prime Offer Rates". If the spread exceeded 1.5% or 3.5% for 1st and 2nd lien loan originations respectively, then the spread was reported to 2 decimal places of precision.
- In the 2004-Q3 2009 time period, the spread was calculated between the Annual Percentage Rate (APR) and the "Treasury Securities of Comparable Maturity". If the spread exceeded 3% or 5% for 1st and 2nd lien loan originations respectively, then the spread was reported to 2 decimal places of precision.
The RATA Comply Suite can accurately calculate the rate spread for any year of HMDA data and will always use the proper methodology and comparative data dependent on the time period for which the calculation is being performed. Below you will find a synopsis of the methods for each time period.
2018:
A rate spread equal to 'NA' is a result of one or more data parameters that do not meet the specifications for reporting the rate spread. Data parameters that will result in a rate spread equal to 'NA' are listed below.
- The Rate Spread is reported on originated loans, applications that were approved but not accepted and preapproval requests that were approved but not accepted. Therefore, any application or loan other than an Origination (Action Taken = 1), Approved Not Accepted (Action Taken = 2) or Preapproval Approved Not Accepted (Action Taken = 8) will result in a rate spread equal to 'NA'.
- If the loan is a Reverse Mortgage, enter 'NA'.
- If the loan is primarily for a business or commercial purpose, enter 'NA'.
- If the above conditions do not apply, then the rate spread is calculated and reported.
Q4 2009 - 2017:
A rate spread equal to 'NA' is a result of one or more data parameters that do not meet the specifications for reporting the rate spread. Data parameters that will result in a rate spread equal to 'NA' are listed below.
- The Rate Spread is reported on originated loans only, therefore, any application or loan other than an Origination (Action Taken = 1) will result in a rate spread equal to 'NA'.
- If the loan is primarily for a business or commercial purpose, or is a home improvement loan that is not dwelling-secured, or is a loan that you purchased, enter 'NA'.
- If the lien status equals 1 and the rate spread calculated is less than 1.5 percentage points, the result will be a rate spread equal to 'NA'. If the lien status equals 2 and the rate spread calculated is less than 3.5 percentage points, the result will be a rate spread equal to 'NA'.
- If the lien status equals 3, not secured by a lien, the result will be a rate spread equal to 'NA'. * The lien status code of 4 is used to identify purchased loans on the LAR reporting form. The rate spread is NOT calculated for purchased loans and will therefore result in a rate spread equal to 'NA'.
- The rate spread is not calculated on Home Equity Lines of Credit (HELOCs). If the institution chooses to report HELOCs, the rate spread should be equal to 'NA'.
- If the above conditions do not apply, then the rate spread is calculated and reported. A rate spread is reported when it is a positive number in excess of the defined thresholds, to 2 decimal places of precision.
2004 - Q3 2009:
A rate spread equal to 'NA' is a result of one or more data parameters that do not meet the specifications for reporting the rate spread. Data parameters that will result in a rate spread equal to 'NA' are listed below.
- The Rate Spread is reported on originated loans only, therefore, any application or loan other than an Origination (Action Taken = 1) will result in a rate spread equal to 'NA'.
- If the loan is primarily for a business or commercial purpose, or is a home improvement loan that is not dwelling-secured, or is a loan that you purchased, enter 'NA'.
- If the lien status equals 1 and the rate spread calculated is less than 3 percentage points, the result will be a rate spread equal to 'NA'. If the lien status equals 2 and the rate spread calculated is less than 5 percentage points, the result will be a rate spread equal to 'NA'.
- If the lien status equals 3, not secured by a lien, the result will be a rate spread equal to 'NA'. * The lien status code of 4 is used to identify purchased loans on the LAR reporting form. The rate spread is NOT calculated for purchased loans and will therefore result in a rate spread equal to 'NA'.
- The rate spread is not calculated on Home Equity Lines of Credit (HELOCs). If the institution chooses to report HELOCs, the rate spread should be equal to 'NA'.
- If the above conditions do not apply, then the rate spread is calculated and reported. A rate spread is reported when it is a positive number in excess of the defined thresholds, to 2 decimal places of precision.
Links to Government Calculators
For 2018 and forward, the CFPB/FFIEC calculator can be found at https://ffiec.cfpb.gov/tools/rate-spread
For the Q4 2009-2017 time period, the FFIEC calculator can be found at https://www.ffiec.gov/ratespread/newcalc.aspx
For the 2004-Q3 2009 time period, the FFIEC calculator can be found at https://www.ffiec.gov/ratespread/oldcalc.aspx
NOTE: Do not use a rate spread calculator to calculate the HOEPA status; they are two different fields which require two different calculations.
For more information on RATA Associates or the RATA Comply Suite, please contact us.
