A subordinate-lien home equity loan closes at an APR of 9.4% when the average prime offer rate for a comparable transaction is 6.1%.
Correct Answer
C) Not higher-priced: 3.3 points is under the 3.5-point subordinate test
The subordinate-lien threshold is 3.5 or more percentage points over the average prime offer rate. The spread here is 3.3, so the loan is not higher-priced, though a shift of two-tenths would change that. Other choices: 1.5 points is the conforming first-lien figure; 2.5 points is the jumbo first-lien figure; and subordinate liens are covered, at their own threshold. Source: 12 CFR 1026.35(a)(1)(ii)
Why This Is the Correct Answer
The subordinate-lien threshold is 3.5 or more percentage points over the average prime offer rate. The spread here is 3.3, so the loan is not higher-priced, though a shift of two-tenths would change that. Other choices: 1.5 points is the conforming first-lien figure; 2.5 points is the jumbo first-lien figure; and subordinate liens are covered, at their own threshold. Source: 12 CFR 1026.35(a)(1)(ii)
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