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WBK Industry News - Federal Regulatory Developments

CFPB Revises the Calculation of “Average Prime Offer Rates”

The CFPB announced the availability of a revised methodology statement for calculating the Average Prime Offer Rates (APORs).  The methodology statement describes the data and the methodology used to calculate APORs for the purposes of Regulation C and Regulation Z.  In particular, the methodology statement has been revised to disclose that the CFPB is using a different source of survey data for the one-year variable rate mortgage product to calculate the weekly APORs.

The CFPB calculates APORs on a weekly basis based on survey data for four hypothetical mortgage products: (1) 30-year fixed rate; (2) 15-year fixed rate; (3) five-year variable rate; and (4) one-year variable rate.  Previously, the survey data for the four mortgage products were all provided by the Freddie Mac Primary Mortgage Market Survey® (PMMS).  However, Freddie Mac recently discontinued publishing the one-year variable rate mortgage data.  As a result, beginning on July 7, 2016, the CFPB began using data provided by HSH Associates for the one-year variable rate mortgage product together with the PMMS data for the other three mortgage products to compute the weekly APOR.

The change in how the APOR is calculated may impact data reporters and creditors in several ways.  Regulation C requires covered financial institutions to report, for certain transactions, the difference between a loan’s annual percentage rate (APR) and the APOR for a comparable transaction. Under Regulation Z, a creditor may be subject to certain special provisions if the difference between a loan’s APR and the APOR for a comparable transaction exceeds certain thresholds.