New rule adds mortgage rate disclosures

WASHINGTON – Oct. 22, 2008 – The Federal Reserve on Monday approved regulations requiring mortgage lenders to tell borrowers how much interest rates differ between prime mortgages and the higher-priced ones offered to less-affluent borrowers. The changes should improve the usefulness of data reported under the Home Mortgage Disclosure Act.

New Regulation C rules will require disclosures if the difference, or spread, between prime and subprime rates is equal to or greater than 1.5 percentage points on a first-lien loan or greater than 3.5 percentage points on a second mortgage.

The Fed said that in defining the rules for rate disclosure, it tried to avoid requiring comparisons among prime mortgages while demanding disclosures only for subprime mortgage rates.

The final rule is effective Oct. 1, 2009. To read the Board’s Federal Register notice in PDF format, go to: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20081020a1.pdf

Source: Reuters News (10/20/08)

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