CFPB Revises Methodology for Determining APORs
The CFPB recently published a notice that it is revising its methodology for determining average prime offer rates (APORs). APORs are used by creditors under Regulation Z to determine whether loans meet the general qualified mortgage (QM) definition, whether certain QM definitions provide the creditor with a conclusive or rebuttable presumption of compliance, and whether the creditor must comply with certain provisions for high-cost or higher-priced mortgage loans. APORs are also used by covered financial institutions for certain reporting requirements under Regulation C.
The CFPB previously relied on Freddie Mac’s Primary Mortgage Market Survey (PMMS) data in calculating APORs, but Freddie Mac recently decided to change its process for gathering PMMS data, such that the public data no longer includes the points, fees, and adjustable rate data that the CFPB uses to construct APORs. To address this change, the CFPB noted that it evaluated potential alternative sources of survey data and determined that data from Intercontinental Exchange Mortgage Technology (ICE Mortgage Technology) is currently the most suitable option to replace the PMMS data. The CFPB believes that 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. Under the revised methodology, available here, the CFPB will use the following products to calculate APORs: (i) 30-year fixed-rate mortgage; (ii) 20-year fixed-rate mortgage; (iii) 15-year fixed-rate mortgage; (iv) 10-year fixed-rate mortgage; (v) 10/6-month ARM; (vi) 7/6-month ARM; (vii) 5/6-month ARM; and (viii) 3/6-month ARM.
The CFPB stated in its notice that it will begin using the ICE Mortgage Technology data and the revised methodology to calculate APORs “on or after April 21, 2023.” The CFPB also indicated that it will continue to post the survey data used to calculate APORs on the FFIEC’s website and identify the source of the data on that page. Additionally, the CFPB noted that it is not changing the frequency of the APOR calculations, which will still be calculated on a weekly basis.
