Notice2023-08310
Notice of Availability of Revised Methodology for Determining Average Prime Offer Rates
Primary source
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Published
April 20, 2023
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB) announces the availability of a revised version of its "Methodology for Determining Average Prime Offer Rates," which describes the data and methodology used to calculate the average prime offer rate (APOR) for purposes of Regulation C and Regulation Z. The methodology statement has been revised to address the imminent unavailability of certain data the CFPB previously relied on to calculate APORs, as a result of a recent decision by Freddie Mac to make changes to its Primary Mortgage Market Survey[supreg] (PMMS). The CFPB has identified a suitable temporary alternative source of the relevant data and will begin relying on those data to calculate APORs on or after April 21, 2023.
Full Text
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<title>Federal Register, Volume 88 Issue 76 (Thursday, April 20, 2023)</title>
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[Federal Register Volume 88, Number 76 (Thursday, April 20, 2023)]
[Notices]
[Pages 24393-24394]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-08310]
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CONSUMER FINANCIAL PROTECTION BUREAU
Notice of Availability of Revised Methodology for Determining
Average Prime Offer Rates
AGENCY: Consumer Financial Protection Bureau.
ACTION: Notice of availability.
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SUMMARY: The Consumer Financial Protection Bureau (CFPB) announces the
availability of a revised version of its ``Methodology for Determining
Average Prime Offer Rates,'' which describes the data and methodology
used to calculate the average prime offer rate (APOR) for purposes of
Regulation C and Regulation Z. The methodology statement has been
revised to address the imminent unavailability of certain data the CFPB
previously relied on to calculate APORs, as a result of a recent
decision by Freddie Mac to make changes to its Primary Mortgage Market
Survey[supreg] (PMMS). The CFPB has identified a suitable temporary
alternative source of the relevant data and will begin relying on those
data to calculate APORs on or after April 21, 2023.
ADDRESSES: The revised methodology statement is available on the
website of the Federal Financial Institutions Examination Council
(FFIEC) at <a href="https://ffiec.cfpb.gov/tools/rate-spread">https://ffiec.cfpb.gov/tools/rate-spread</a>.
FOR FURTHER INFORMATION CONTACT: Waeiz Syed, Senior Counsel, Office of
Regulations, at 202-435-7700. If you require this document in an
alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#b0f3f6e0f2eff1d3d3d5c3c3d9d2d9dcd9c4c9f0d3d6c0d29ed7dfc6"><span class="__cf_email__" data-cfemail="6724213725382604040214140e050e0b0e131e270401170549000811">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: Average prime offer rates (APORs) are annual
percentage rates derived from average interest rates, points, and other
loan pricing terms currently offered to consumers by a representative
sample of creditors for mortgage loans that have low-risk pricing
characteristics. APORs have implications for data reporters under
Regulation C, 12 CFR part 1003, and creditors under Regulation Z, 12
CFR part 1026. 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.\1\ Under Regulation Z, a loan meets the general qualified
mortgage (QM) definition if the APR exceeds the APOR for a comparable
transaction by less than the applicable threshold as of the date the
interest rate is set.\2\ The difference between the APR and APOR also
determines whether certain QM definitions provide the creditor with a
conclusive or rebuttable presumption of compliance,\3\ and whether the
creditor must comply with certain provisions for high-cost or higher-
priced mortgage loans.\4\
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\1\ 12 CFR 1003.4(a)(12)(i).
\2\ 12 CFR 1026.43(e)(2)(vi).
\3\ 12 CFR 1026.43(b)(4) and (e)(1). Under Regulation Z, loans
that meet the requirements for ``qualified mortgages'' obtain either
a conclusive or rebuttable presumption of compliance with Regulation
Z's requirement to make a reasonable and good faith determination of
a consumer's ability to repay any residential mortgage loan.
\4\ 12 CFR 1026.32(a)(1)(i) and 1026.35(a)(1).
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Currently, to calculate APORs, the CFPB uses pricing data from the
Freddie Mac Primary Mortgage Market Survey[supreg] (PMMS) on three
products--30-year fixed-rate mortgage; 15-year fixed-rate mortgage; and
five-year variable-rate mortgage--and pricing data from CFPB's own
internal survey on one-year variable-rate mortgages. The CFPB
calculates APORs on a weekly basis using the methodology set forth in a
statement available to the public on the FFIEC's website.
The CFPB is publishing this notice to inform the public that a
revised methodology statement is now available. In September 2022, the
CFPB learned that Freddie Mac planned to change the public version of
PMMS to no longer include points, fees, and adjustable rates data used
by the CFPB to construct APORs. To address the imminent unavailability
of certain data previously relied on to calculate APORs, the CFPB
identified a suitable temporary alternative source of survey data.
After evaluating potential sources, the CFPB determined that data from
Intercontinental Exchange Mortgage Technology (ICE Mortgage Technology)
is currently the most suitable option to replace PMMS. ICE Mortgage
Technology provides a data source that has sufficient pricing data for
the variables and base products that the CFPB requires to calculate
APORs. With this switch over to ICE Mortgage Technology data, the CFPB
is transitioning to using additional base products (such as a 20-year
fixed-rate mortgage and a 10/6-month ARM) and removing others (such as
the 1-year variable-rate mortgage) to ensure there is a firm basis for
estimating APORs.\5\ Having data for more than two kinds of fixed-rate
mortgage products and more than two kinds of variable-rate mortgage
products provides a firmer basis for estimating rates across a full
range of fixed-rate and variable-rate mortgage products. The CFPB will
therefore use the following eight base products to calculate APORs: 30-
year fixed-rate mortgage; 20-year fixed-rate mortgage; 15-year fixed-
rate mortgage; 10-year fixed-rate mortgage; 10/6-month ARM;
[[Page 24394]]
7/6-month ARM; 5/6-month ARM; and 3/6-month ARM.
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\5\ The CFPB considered the typical volume of these products
when considering which ones to use when calculating APORs. Having
more pricing data for a product will provide more accurate APOR
estimates. In addition, because the CFPB will no longer use one-year
variable-rate mortgages as a base product to calculate APORs, it
will no longer conduct its own internal survey on one-year variable-
rate mortgages.
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The CFPB has updated the FFIEC's website to note this change in the
source of survey data and published a revised methodology statement
that reflects corresponding changes in the methodology. The CFPB will
begin using ICE Mortgage Technology data and the revised methodology to
calculate APORs on or after April 21, 2023. The CFPB will continue to
post the survey data used to calculate APORs on the FFIEC's website
every week at <a href="https://ffiec.cfpb.gov/tools/rate-spread">https://ffiec.cfpb.gov/tools/rate-spread</a> and will
continue to identify the source of the survey data on that web page.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2023-08310 Filed 4-19-23; 8:45 am]
BILLING CODE 4810-AM-P
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