Revision to the HMDA Reporting Threshold

CUNA
November 19, 2008 | COMMENTS

The Federal Reserve Board (Fed) has amended Regulation C, the Home Mortgage Disclosure Act, by revising the rules for reporting price information on higher-priced loans. These revisions will be identical to the definition of "higher-priced mortgage loan" that was approved by the Fed in the final rule issued earlier this year that amends the Regulation Z requirements with regard to residential mortgage loans.

Until now, Regulation C currently required lenders to report the spread between the annual percentage rate (APR) on a loan and the yield on comparable Treasury securities if the spread is at least three percentage points for first-lien loans or five percentage points for subordinate-lien loans.

Under this final rule, a lender will report the spread if the loan APR exceeds an average of comparable prime mortgage rates by at least 1.5 percentage points for first-lien loans or 3.5 percentage points for subordinate lien loans. For now, the Fed will rely on the Primary Mortgage Market Survey (PMMS) conducted by Freddie Mac for purposes of determining the "average prime mortgage rate" and plans to post these rates and related information on the Internet on a weekly basis. The Fed may at any time consider other alternatives for calculating this average rate, including conducting its own survey. Lenders will be required to use the most recent average rate as of the date in which the lender locks in the interest rate for the final time before the loan is consummated.

The final rule is intended to maintain consistency between Regulation C and Regulation Z for purposes of defining higher cost mortgage loans. Under both rules, the intent is to require reporting of all subprime loans, as well as a portion of the "alt-A" market, which is in between the prime and subprime market. Currently, this will also cover a significant share of prime jumbo loans. Although this is not intended by the Fed, it is believed that this may only be temporary due to the unusually large spread between prime and conforming mortgage loans.

In response to comments from CUNA and others, the Fed has delayed the effective date until January 1, 2009. Lenders will use this new rate spread for loans in which applications are taken on or after October 1, 2009. The new rate spread will apply to all loans consummated after January 1, 2010, even if the applications were taken prior to October 1, 2009.

If you have questions or need more information about these changes, please contact Senior Vice President and Deputy General Counsel Mary Dunn at mdunn@cuna.coop or by telephone at (800) 356-9655, extension 6736, or contact Senior Assistant General Counsel Jeff Bloch at jbloch@cuna.coop or by telephone at (800) 356-9655, extension 6732. You may also access click here for more information about these changes.