The Vermont Department of Financial Regulation recently entered an order to suspend the requirement to provide a “high-rate” mortgage loan disclosure under Regulation B-98-2.
Under Title 9, Section 104 of the Vermont Statutes Annotated, the Vermont Commissioner of Financial Regulation (the “Commissioner”), adopted Regulation B-98-2, which adds a disclosure requirement for a first-lien loan when a borrower is expected to be charged (1) interest in excess of three percent over a rate established pursuant to 32 V.S.A. § 3108 (the “Declared Rate”) or (2) over four points in closing costs.
The current Declared Rate is based on the average prime loan rate charged by banks (as determined by the Board of Governors of the Federal Reserve System) for a 12-month period beginning October 1, 2020 and ending September 30, 2021. For 2022, the Commissioner established a Declared Rate of 3.25%, so that a high-rate mortgage disclosure would be required for a first-lien mortgage loan with an interest rate exceeding 6.25% (the “2022 Declared Threshold”). For more information, click here.
The recent order states that the Commissioner has chosen to suspend the disclosure requirement for “high-rate” mortgage loans in the best interest of the public. When the Declared Rate was set in November 2021, the 30-Year Fixed Rate Conforming Mortgage Index rate was less than two basis points above the Declared Rate. By May 2, 2022, the 30-Year Fixed Rate Conforming Mortgage Index rate had increased by almost seventy percent. Given this substantial increase and the likelihood that the market rate may exceed the 2022 Declared Threshold, the Commissioner determined that the disclosure may be misleading to borrowers by stating that they may be eligible for a loan with a lower interest rate from another lender.
The order to suspend the disclosure requirement “high-rate” mortgage loans went into effect on May 5, 2022, will “remain in effect until January 1, 2023, or until rescinded or superseded by the Commissioner, whichever is earlier.” The order does not affect disclosure requirements under Regulation B-98-2 for “high-point” mortgage loans.
DocMagic will continue to provide the Vermont High Rate, High Point Disclosure (VTHRHP.DSC) when applicable for “high points” but will no longer provide the disclosure for “high rate” loans that exceed the 2022 Declared Threshold of 6.25%. This update will remain in effect under the order expires or the Commissioner issues a new order.
