| FHA Loan Programs |
Home Mortgage Disclosure Act
The Federal Reserve Board on Monday approved final
amendments to Regulation C that revise the rules for
reporting price information on higher-priced mortgage
loans. The changes are intended to improve the accuracy
and usefulness of data reported under the Home
Mortgage Disclosure Act.
Regulation C currently requires lenders to collect and
report the spread between the annual percentage rate
(APR) on a mortgage loan and the yield on a Treasury
security of comparable maturity if the spread is greater
than 3.0 percentage points for a first lien loan or greater
than 5.0 percentage points for a subordinate lien loan.
This difference is known as a rate spread. Under the final
rule, a lender will report the spread between the loan's
APR and a survey-based estimate of APRs currently
offered on prime mortgages of a comparable type
("average prime offer rate") if the spread is equal to or
greater than 1.5 percentage points for a first lien loan or
equal to or greater than 3.5 percentage points for a
subordinate-lien loan. The Board will publish average
prime offer rates based on the Primary Mortgage Market
Survey® currently published by Freddie Mac. The Board
will conduct its own survey if it becomes appropriate or
necessary to do so.
In setting the rate spread reporting threshold, the Board
sought to cover subprime mortgages and generally avoid
covering prime mortgages. Applying the new, market
survey-based benchmarks in place of Treasury security
yields should better achieve this purpose and ensure more
consistent and more useful data.
The changes to Regulation C conform the threshold for
rate spread reporting to the definition of higher-priced
mortgage loans adopted by the Board under Regulation Z
(Truth in Lending) in July of 2008. By implementing the
same pricing threshold test under both regulations, the
Board is reducing the overall regulatory burden on
mortgage lenders.
The Federal Reserve Board on Monday approved final
amendments to Regulation C that revise the rules for
reporting price information on higher-priced mortgage
loans. The changes are intended to improve the accuracy
and usefulness of data reported under the Home
Mortgage Disclosure Act.
Regulation C currently requires lenders to collect and
report the spread between the annual percentage rate
(APR) on a mortgage loan and the yield on a Treasury
security of comparable maturity if the spread is greater
than 3.0 percentage points for a first lien loan or greater
than 5.0 percentage points for a subordinate lien loan.
This difference is known as a rate spread. Under the final
rule, a lender will report the spread between the loan's
APR and a survey-based estimate of APRs currently
offered on prime mortgages of a comparable type
("average prime offer rate") if the spread is equal to or
greater than 1.5 percentage points for a first lien loan or
equal to or greater than 3.5 percentage points for a
subordinate-lien loan. The Board will publish average
prime offer rates based on the Primary Mortgage Market
Survey® currently published by Freddie Mac. The Board
will conduct its own survey if it becomes appropriate or
necessary to do so.
In setting the rate spread reporting threshold, the Board
sought to cover subprime mortgages and generally avoid
covering prime mortgages. Applying the new, market
survey-based benchmarks in place of Treasury security
yields should better achieve this purpose and ensure more
consistent and more useful data.
The changes to Regulation C conform the threshold for
rate spread reporting to the definition of higher-priced
mortgage loans adopted by the Board under Regulation Z
(Truth in Lending) in July of 2008. By implementing the
same pricing threshold test under both regulations, the
Board is reducing the overall regulatory burden on
mortgage lenders.
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