Home Mortgage Disclosure Act

The Federal Reserve Board’s changes to Regulation C have been approved to make data reported under the Home Mortgage Disclosure Act more reliable and useful.

In particular, the revisions will change the way that information on higher-priced mortgage loans gets reported.

Previously, Regulation C required when lenders must report the difference between the annual percentage rate (APR) on a mortgage loan and the yield on a Treasury security that was of the same maturity, known as a rate spread.

The rate spread had to be reported if it was greater than 3.0 percentage points for a first-lien loan, or greater than 5.0 percentage points for a subordinate lien loan.

With the amendments to the regulation, lenders must now report the spread between the APR on the loan and a survey-based estimate of APRs offered on prime mortgages comparable to the loan, known as the average prime offer rate. This is reported when the spread is at or more than 1.5 percentage points for a first-lien loan, or 3.5 percentage points for a subordinate lien loan.

The Primary Mortgage Market Survey published by Freddie Mac will be used to determine average prime offer rates.

The new reporting threshold is meant to cover subprime mortgages, and it uses benchmarks based on market surveys rather than Treasury security yields to allow the data to be more useful and consistent.

The changes by the Federal Reserve Board put Regulation C at the same rate-spread reporting threshold as Regulation Z (Truth in Lending), which deals with mortgage loans that are priced higher. Having a consistent threshold under both regulations will give mortgage lenders less regulatory burden under which to operate.