[Federal Register Volume 88, Number 76 (Thursday, April 20, 2023)]
[Notices]
[Pages 24393-24394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08310]


=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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 https://ffiec.cfpb.gov/tools/rate-spread.

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 
[email protected].

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 https://ffiec.cfpb.gov/tools/rate-spread 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