Opinion ID: 4421338
Heading Depth: 3
Heading Rank: 1

Heading: 44 percent.

Text: So under the analysis conducted by Ayres, HC2 has an Annual Percentage Rate of 5.58 percent and a rate spread of 2.03 percent, HC6 has an Annual Percentage Rate of 6.00 percent and a rate spread of 1.58 percent, and NHW8 has an Annual Percentage Rate of 5.32 percent and a rate spread of 1.12 percent. But eliminating the promotional discount and zeroing the lender credits on loans HC2 and HC6 yields an Annual Percentage Rate of 4.71 percent and a rate spread of 1.16 for loan HC2, an Annual Percentage Rate of Annual Percentage Rate of 5.86 percent and a rate spread of 1.44 percent for loan HC6, and an Annual Percentage Rate of 5.4431 percent and a rate spread of 1.25 percent for loan NHW8. Under Siskin’s analysis, loan HC2 is slightly cheaper than NHW8 by 0.09 percent and HC6 is more expensive than NHW8 by 0.19 percent. In his supplemental report, Ayres argued that Siskin’s calculations were distorted by his apparent failure to zero the lender credits received by NHW8. As Ayres explained, Siskin did not “explicitly state whether his calculation of the hypothetical rate spread for NHW8 includes the actual lender credits or whether he assumes a hypothetical lender credit of zero.” Instead, Siskin’s report only “provide[d] the hypothetical note rate and [Annual Percentage Rate] that would have been offered on [HC2 and HC6] if no lender credit had been provided or no 33 Case: 18-13152 Date Filed: 07/30/2019 Page: 34 of 49 promotional pricing discount had been offered,” and failed to “provide[] the note rate that would have been offered for loan NHW8 if no lender credit had been provided to that borrower.” Despite this alleged insufficiency, Ayres constructed hypothetical comparisons of the rate spreads of loans HC2, HC6, and NHW8 on the assumption that “NHW8’s lender credits remain $479 in Dr. Siskin’s hypothetical rate spread calculation.” Ayres “attempted to replicate Dr. Siskin’s calculations under the incomplete hypothetical scenario in which HC6 received no lender credit (and their note rates adjusted accordingly to the note rates specified by Ms. Hunt), NHW8 continued to receive a lender credit, and neither loan received the 50 basis point promotional discount allegedly given to loan NHW8.” He applied the same procedure to develop a comparison of loans HC2 and NHW8. But Ayres departed from Siskin’s method in one key respect. Ayres faulted Siskin for failing to “control for the difference in [Federal Housing Administration] Mortgage Insurance Premiums (“MIP”) policies that were in place at the times HC2 and NHW8 were originated.” Because “HC2 was originated in November 2012, whereas NHW8 was originated in December 2013” and “the government increased the cost and duration of [mortgage insurance premiums] in April 2013 and June 2013,” Ayres projected that “adjusting for the differences in [mortgage insurance premiums] policies would serve to increase the difference between the rate spreads 34 Case: 18-13152 Date Filed: 07/30/2019 Page: 35 of 49 of HC2 and NHW8.” So Ayres attempted to control for the difference in mortgageinsurance premium costs. Ayres’s analysis yielded somewhat different results from Siskin’s. Ayres calculated the Annual Percentage Rates of HC2, HC6, and NHW8 as 5.4118 percent, 5.9560 percent, and 5.4448 percent, respectively. He deduced a rate spread of 1.86 percent for loan HC2, 1.54 percent for loan HC6, and 1.25 percent for loan NHW8. So although Ayres agreed with Siskin’s conclusion that the hypothetical rate spread of NHW8 would equal 1.25 percent, Ayres’s estimates of the rate spreads for HC2 and HC6 were higher than Siskin’s estimates of 1.16 percent and 1.44 percent. Under Ayres’s projections, HC2 is more expensive than NHW8 by 0.61 percent and HC6 is more expensive than NHW8 by 0.29 percent. The results of each expert analysis are replicated in the following table: 35 Case: 18-13152 Date Filed: 07/30/2019 Page: 36 of 49 Actual and Projected APR & Rate Spreads for Loans HC2, HC6, & NHW8 Actual Siskin Hypothetical Ayres Hypothetical Assuming $0 Assuming 2013 Lender Credits for MIP Policies, $0 HC2 & HC6 & No Lender Credits for Promotional HC2 & HC6 & No Discount Promotional Discount HC2 APR APR APR 5.5816% 4.71% 5.4118% Rate Spread Rate Spread Rate Spread