CUNA and NAFCU weighed in on the Federal Reserve's proposed revisions of guidelines implementing the Home Mortgage Disclosure Act (HMDA), and while both groups applauded the Fed's attempts to provide more flexibility to financial institutions, they had some criticisms, as well.
The proposed revisions to the official staff commentary for HMDA (Reg C) are scheduled to take effect at the start of next year. They provide guidance for applying new rules to loan applications received prior to Jan. 1, 2004, for which final action is taken after that date.
Under the new rules, lenders will be required to report the rate spread between the loan's annual percentage rate and yield on comparable Treasury securities when the spread exceeds certain thresholds. The Fed, in its proposed rules, had proposed using the Treasury securities in effect as of the 15th of the month before the date when the interest rate is "locked," or set for the final time, before the loan is consummated.
Both CUNA and NAFCU oppose using any date other than the "rate lock date" for purposes of calculating the rate spread.
"Using other dates could provide misleading and possibly useless data," CUNA Assistant General Counsel Jeff Bloch wrote, "particularly if the final rate is compared to a Treasury yield that is published more than 30 days before the date of the final rate is locked."
NAFCU CEO Fred Becker agreed, adding that that the resulting calculations could unfairly show a lender as a "high- rate lender," even though changes in interest rates-as well as consumer preferences to float their rates-could actually be behind the calculated rate spreads to be high.