A tool exists to determine the difference between the annual percentage rate (APR) of a loan and the yield on Treasury securities of comparable maturity. This calculation assists in identifying potentially higher-priced mortgage loans as defined under the Home Mortgage Disclosure Act (HMDA). For example, if a mortgage loan’s APR exceeds the yield on a Treasury security with a similar term by a specific threshold, it may be flagged for additional scrutiny. The output of this specific calculation is crucial for regulatory compliance.
This calculation is vital for financial institutions to ensure adherence to regulatory requirements and prevent discriminatory lending practices. It assists in monitoring lending patterns and identifying potential disparities in pricing. Historically, these calculations were performed manually, but the development of automated tools significantly improved efficiency and accuracy, reducing the risk of errors and ensuring consistent application of regulatory standards. This development allows for a more thorough review of loan portfolios and provides valuable data for fair lending analyses.
