New York Banking Law Section 6-m(1)(c)(ii) identifies the FreddieMac Primary Mortgage Market Survey (“PMMS”) as the threshold for determining the calculations for defining a “subprime home loan.” Beginning with the November 17th publication of the PMMS, Freddie Mac announced it would no longer publish the 5/1 ARM rate, which is used in the New York Subprime Audit for ARM loans with an adjustment period of at least 3 years. On December 20th, the NY Department of Financial Services published updated guidance in an Industry Letter to replace the 5/1 ARM PMMS with the Average Prime Offer Rate relevant for a 5/1 ARM. The guidance was made retroactive to November 17th.
The Industry Letter provides support for the change under Section 6-M(1)(c)(ii) of the New York Banking Law, which allows the Superintendent to “designate such other threshold rates as may be necessary to…alleviate such unduly negative effects,” from discontinuance of the 5/1ARM PMMS. As a result of this update, for any ARM with an initial fixed period of 3 years or longer, DocMagic will use the 5 year ARM APOR value in the New York Subprime test.
Please see our New York Subprime Home Loan Audit memo for more information.
