[Federal Register Volume 65, Number 187 (Tuesday, September 26, 2000)]
[Notices]
[Pages 57813-57815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24660]


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FEDERAL HOUSING FINANCE BOARD

[2000-N-5]


Monthly Survey of Rates and Terms on Conventional 1-Family 
Nonfarm Mortgage Loans

AGENCY: Federal Housing Finance Board.

ACTION: Notice and request for comments.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is seeking 
comments on several aspects of its Monthly Survey of Rates and Terms on 
Conventional 1-Family Nonfarm Mortgage Loans. The Finance Board seeks 
comments on whether it should continue to publish mortgage information 
by lender type. The Finance Board seeks comments on whether the 
sampling and weighting design for this survey should draw lenders 
without regard to lender type. If so, the Finance Board seeks 
suggestions for alternative sampling and weighting methodologies. The 
Finance Board also seeks comments on the designation of successor 
adjustable-rate mortgage indexes if it decides to stop publishing data 
by lender type or revises the regional information it now publishes.

DATES: Changes to the sampling and weighting methodology will become 
effective in accordance with section F of the SUPPLEMENTARY INFORMATION 
unless comments dictate otherwise. The Finance Board will accept 
written comments on or before October 26, 2000.

ADDRESSES: Address comments to Elaine L. Baker, Secretary to the Board, 
(202) 408-2837, [email protected], Federal Housing Finance Board, Office 
of Information Management and Technology Support, 1777 F Street, NW., 
Washington, DC 20006. Comments will be available for inspection at this 
address.

FOR FURTHER INFORMATION CONTACT: Joseph A. McKenzie, Deputy Chief 
Economist, (202) 408-2845, [email protected], Office of Policy, 
Research, and Analysis, Federal Housing Finance Board, 1777 F Street, 
NW., Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

A. Background

    The Finance Board conducts and prepares the Monthly Survey of Rates 
and Terms on Conventional 1-Family Nonfarm Mortgage Loans. This survey, 
usually called the ``Monthly Interest Rate Survey'' (MIRS), asks a 
sample of approximately 300 mortgage lenders to report the terms and 
conditions on all conventional mortgage loans for the purchase of 
single-family, nonfarm homes that they close during the last 5 working 
days of the month. The sample of lenders includes savings associations, 
mortgage companies, commercial banks, and savings banks that have 
volunteered to participate in the survey. MIRS provides national and 
regional data on mortgage interest rates, mortgage terms, and house 
prices. The Finance Board's regulations describe MIRS more thoroughly. 
See 12 CFR 906.3.
    From 1963 to September 1989, the former Federal Home Loan Bank 
Board conducted MIRS. Identical provisions in the Federal National 
Mortgage Association Charter Act, 12 U.S.C. 1717(b)(2), and the Federal 
Home Loan Mortgage Corporation Act, 12 U.S.C. 1454(a)(2), allow these 
two government-sponsored enterprises annually to adjust the maximum 
size of mortgage loans they can purchase or guarantee by the October-
over-October percentage price change in house prices as reported in 
MIRS ``conducted by the Federal Housing Finance Board.''
    More recently, the 1994 Department of Housing and Urban Development 
(HUD) appropriation act tied the high-cost area limits for Federal 
Housing Administration (FHA)-insured mortgages to the purchase-price 
limitations of Fannie Mae and Freddie Mac, thus linking the FHA limits 
indirectly to MIRS. See Department of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, Pub. L. 
103-327, 108 Stat. 2298 (Sept. 28, 1994). In addition, the Internal 
Revenue Service uses the data from MIRS to set the safe-harbor 
purchase-price limits for mortgages purchased with the proceeds of 
mortgage revenue bond issues. See 26 CFR 6a.103A-2(f)(5).
    Beyond its use for indexing the conforming loan limit, MIRS 
provides information for general statistical purposes and program 
evaluation. Economic policy makers use the data to determine interest 
rates, down payments, terms to maturity, terms on adjustable-rate 
mortgages (ARMs), initial fees and charges on mortgage loans, and other 
trends in mortgage markets. Information from MIRS regularly appears in 
the popular and trade press.
    Around the 26th of each month, the Finance Board publishes a MIRS 
press release with mortgage rate and term information by property type 
(all, newly built, and previously occupied; Table I), by loan type 
(adjustable-rate and fixed-rate; Table II), and by lender type (savings 
association, mortgage company, commercial bank, savings bank; Table 
III), and a table providing data on 15- and 30-year conforming fixed-
rate loans (Table V). In addition, it publishes quarterly tables with 
rate and term information for metropolitan areas (Table IV) and for 
Federal Home Loan Bank districts (Table VI).
    An ARM index derived from MIRS--the National Average Contract 
Mortgage Rate for the Purchase of Previously Occupied Homes--was the 
only ARM index that Federally chartered savings institutions could use 
for a period in the early 1980's. A very small proportion of existing 
ARMs may use another interest-rate series from MIRS as an ARM index.

B. Current Sampling and Weighting of the Data

    The Finance Board samples savings associations, mortgage companies, 
commercial banks, and savings banks for MIRS because it publishes 
monthly aggregate data by lender type. In addition, the Finance Board 
samples lenders representing all regions because it publishes quarterly 
data for 31 selected large metropolitan areas, quarterly data for the 
12 Federal Home Loan Bank districts, and annual data for all 50 states 
and for 60 metropolitan statistical areas (MSAs).
    As with most survey data, the tabulated MIRS data reflect the 
weighting of the individual responses. The current weighting draws 
depository institutions with equal probabilities of selection from 
``lender-type geo strata'' (for example, commercial banks in Nebraska, 
savings associations from the Cincinnati MSA, or savings banks from the 
Boston CMSA). Since the sample of loans reported in a given month may 
differ from true lending experience (for

[[Page 57814]]

example, over- or under-representing certain regions), the MIRS data is 
weighted to comport with information on lending patterns derived from 
independent sources:
    (1) The data is adjusted so that the distribution of loans by 
lender type matches the lender-type distribution in the latest Home 
Mortgage Disclosure Act (HMDA) release of the Board of Governors of the 
Federal Reserve System, and
    (2) The data is adjusted so that the distribution of loans by 
Federal Home Loan Bank district matches the state pattern of mortgage 
originations annually reported in the HMDA data.
    The weighting process builds up the national data from four 
separate subsamples based on lender type, where the shares of loans by 
lender type come from the HMDA data. On balance, this weighting process 
significantly increases the importance of loans reported by commercial 
banks and reduces the importance of loans reported by savings 
associations because commercial bank loans are under-represented in the 
sample. Regional adjustment of the data does not have a significant 
effect on the results because the geographic pattern of responses 
approximates aggregate lending patterns.

C. Proposed Sampling by Lender Type

    The Finance Board publishes data by lender type principally as a 
historical matter and drawing four separate subsamples corresponding to 
savings associations, mortgage companies, commercial banks and, savings 
banks. However, as the financial services sector has evolved 
significantly, the distinctions between commercial banks and thrifts 
continue to erode. With institutional homogenization, publishing data 
by lender type may no longer be useful or meaningful.
    MIRS presents a ``clustered sampling'' problem. The item of 
interest is individual loans, but the Finance Board must sample lenders 
to get the individual loan data. The loans must come from all regions 
and must represent all lender types. Several recent developments have 
improved the geographical dispersion of MIRS loans. First, some large 
national mortgage companies participate in MIRS. This means that 1 
lender may report loans from 20 or more states. Second, the continuing 
trend toward the consolidation of depository institutions has resulted 
in large institutions that originate loans in many states.
    The reported MIRS data for both region and lender type show 
considerable variation in the average terms across region and across 
lender type. However, most of these differences are attributable to the 
mix of loans made. Interest rates on standard 30-year conforming loans 
differ little across lender type and across region. This similarity 
calls into some question the need to sample lenders by region and by 
lender type and the wisdom of reporting MIRS interest-rate data by 
region and lender type. There is, of course, considerable house price 
variation across regions.
    The geographic dispersion of MIRS loans is not an issue. As stated 
earlier, the existing sample includes a number of national mortgage 
companies with broadly dispersed lending patterns. It is not necessary 
to sample lenders from many geo strata to get good geographic coverage 
of actual loans reported.
    In light of the continuing trend toward consolidation and 
homogenization of depository institutions, a more meaningful MIRS 
weighting methodology would be a size-stratified methodology based on 
mortgage originations. Lenders with small origination volumes would be 
sampled at lower frequencies and higher weights; lenders with high 
origination volumes would be sampled at higher frequencies and lower 
weights. The HMDA file could be the source for establishing weights as 
it contains mortgage origination data for all but the smallest lenders. 
This proposed sampling would not select lenders based on lender type 
but could use location as a sampling factor.
    The Finance Board specifically requests comments on the following:
     Should it continue to report MIRS data by lender type?
     Should it continue to sample MIRS lenders by lender type?
     Do institutional changes render the data by lender type 
meaningless?

D. MIRS Reports

    The monthly MIRS report contains a table on mortgage rates and 
terms by lender type (savings association, commercial bank, mortgage 
company, and savings bank). (This is Table III of the monthly MIRS 
release.) Because of institutional homogenization and no economic 
differences in mortgage rates, the Finance Board is considering the 
elimination of this monthly table.
    Each quarter, the Finance Board publishes a MIRS table of mortgage 
interest rates and terms for 31 metropolitan areas. (This table appears 
as Table IV in the January, April, July, and October MIRS releases.) 
These are not the 31 largest metropolitan areas. The Finance Board is 
considering adjusting the list of reported areas to reflect current 
population rankings. Among the areas that may be deleted from Table IV 
are Greensboro, NC, Rochester, NY, and Louisville, KY.

E. Adjustable-Rate Mortgage Index

    A very small number of ARMs may use as an index a MIRS interest 
rate series by lender type. This information appears in Table III of 
the regular monthly MIRS release. If the Finance Board were to adopt a 
changed MIRS sampling methodology that no longer separately sampled 
lenders by lender type, then probably it would cease the publication of 
Table III in the monthly MIRS release.
    Section 402(e)(4) of the Financial Institutions Reform, Recovery, 
and Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, tit. IV, sec. 
402(e)(4), 103 Stat. 183 (1989), codified at 12 U.S.C. 1437 note, 
requires the Chairperson of the Finance Board to designate a 
``substantially similar'' successor index if the Finance Board no 
longer makes available any index from MIRS. If the Finance Board were 
to stop providing Table III, then it proposes to designate the National 
Average Contract Mortgage Rate for the Purchase of All Homes by 
Combined Lenders as the successor index for any ARM index that uses a 
contract rate from Table III. It also proposes to designate the 
National Average Effective Mortgage Rate for the Purchase of All Homes 
by Combined Lenders as the successor index for any ARM index that uses 
an effective rate from Table III.
    The Finance Board seeks comment on these proposed successor index 
rates.
    The Finance Board publishes both of the proposed successor index 
rates in the top panel of Table I in the monthly MIRS release, and the 
current value of both interest rates is available on a recording 
maintained by the Finance Board. The Finance Board is proposing these 
successor index rates because the loans reported in Table III by lender 
type include loans on both newly built and previously occupied homes. 
The proposed successor index rates also include loans on both newly 
built and previously occupied homes. The only difference is that the 
data in Table I combines loans from all types of lenders, whereas Table 
III reports mortgage data by type of lender.
    Changes that the Finance Board is considering concerning Table IV 
of the MIRS release could affect a very small number of ARMs. The 
Finance Board knows of only one lender that uses regional mortgage 
rates reported in

[[Page 57815]]

Table IV as an ARM index rate.\1\ Should any ARM be linked to a 
mortgage rate for a metropolitan area that will be deleted from the 
regular quarterly table, the Finance Board proposes as the successor 
index the National Average Contract Mortgage Rate for the Purchase of 
All Homes by Combined Lenders the successor index if that ARM index is 
a contract rate from Table IV. It also proposes to designate the 
National Average Effective Mortgage Rate for the Purchase of All Homes 
by Combined Lenders to be the successor index for any ARM index that is 
an effective rate from Table IV. The Finance Board publishes both of 
the proposed successor index rates in the top panel of Table I in the 
monthly MIRS release, and the current value of both interest rates is 
available on a recording maintained by the Finance Board. This 
particular designation would apply only to those metropolitan areas 
that the Finance Board would delete from the regular quarterly Table 
IV.
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    \1\The metropolitan area in question is St. Louis, and the 
Finance Board would continue to publish data for this region.
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    The Finance Board seeks comments on these proposed successor index 
rates.

F. Effective Date and Transition Provisions

    If the Finance Board adopts the MIRS weighting changes described 
above, it would implement the changes effective with the January 2001 
data to allow the data for a whole calendar year to be calculated using 
the same sampling and weighting methodology. Before implementing any 
changes, the Finance Board would employ the services of a statistician 
to ensure the appropriateness of the MIRS sampling and weighting 
methodology.
    The Finance Board also would make available special tabulations so 
that Fannie Mae and Freddie Mac would have data calculated on the same 
basis for their determination of the conforming loan limit for 2002. 
This calculation would occur in November 2001.

    Dated: September 18, 2000.

    By the Federal Housing Finance Board.
James L. Bothwell,
Managing Director.
[FR Doc. 00-24660 Filed 9-25-00; 8:45 am]
BILLING CODE 6725-01-P