Posted by ReneeK/MI on March 27, 2009, 4:17 am, in reply to "Multiple methods... hmm."
68.43.29.109
The law allows lenders to use whatever formulas they can dream up, as long as that formula functions the same as the FDIC's examples (all other things being equal - except not much really IS equal).
There are two methods allowed (in the TILA)for amortizing the effects of the payment on the unpaid balance.
So, regardless of specific formula, you can look at the FDIC's examples & definitions and see that the calculation must be made over the full term of the loan (start to maturity date, not 7 years (unless that IS the full term).
What was the question again?
I suspect you had a banking 'tool' spreadsheet using 7 years (as an average term consumer's hold a mtg) that maybe was used to 'offset' or compare to the disclosed FDIC/TILA compliant APR, when pitching a particular product to the consumer?
I believe the area of greatest contention in the calculation of APR's lies in what fees go IN and what fees stay OUT - rather than the actual computations. Fuel for many long lunches for legal depts.
Whew - okay, we're all working WAY too hard on this for the money!
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