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From Banking and Finance Law Daily, September 16, 2016

CFPB revises methodology for determining ‘average prime offer rates,’ removes source information

By Stephanie K. Mann, J.D.

The Consumer Financial Protection Bureau has released a revised statement on the "Methodology for Determining Average Prime Offer Rates." According to the CFPB’s notice, the revised statement will now be used to calculate average prime offer rates (APORs). The CFPB removed from the methodology statement the references to the sources of survey data used to calculate average prime offer rates.

As observed by the CFPB’s notice, APORs are annual percentage rates that are "derived from average interest rates, points, and other loan pricing terms offered to borrowers by a representative sample of lenders for mortgage loans that have low-risk pricing characteristics."

Implications. The CFPB’s revised methodology for APORs has implications for data reporters under Regulation C—Home Mortgage Disclosure (12 CFR Part 1003) because Reg. C requires covered financial institutions to report, for certain transactions, the difference between a loan’s annual percentage rate and the APOR for a comparable transaction.

Likewise, the revision has implications for creditors under Regulation Z—Truth in Lending (12 CFR Part 1026) because, under Reg. 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."

Change in methodology. To streamline how the bureau provides notice of the sources of survey data, the CFPB will no longer revise the methodology statement each time it is necessary to change the source of survey data. Accordingly, the bureau revised the methodology statement to remove the references to the sources of survey data. In addition to this change, the CFPB corrected the methodology statement to clarify that the survey data reflect only points and does not include fees.

MainStory: TopStory CFPB Loans Mortgages TruthInLending

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