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.
On November 1, 2022, the Vermont Commissioner of Taxes issued a memorandum on interest rates for 2023. The memorandum announced that the Declared Rate for 2023 would be 4.00%. 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, 2021 and ending September 30, 2022. With a 2023 Declared Rate of 4.00%, a high-rate mortgage disclosure would be required for a first-lien mortgage loan with an interest rate exceeding 7.00% (the “2023 Declared Threshold”).
On December 15, 2022, the Vermont Department of Financial Regulation entered an order extending the previous suspension of the requirement for a “high-rate” mortgage loan disclosure until July 1, 2023* The original order to suspend was first issued in May 2022 and was set to expire on January 1, 2023 when the new Declared Rate became effective.
The latest order states that the Commissioner had chosen to extend the suspension of the disclosure requirement for “high-rate” mortgage loans in the best interest of the public. The “high-rate” mortgage loan disclosure is not meant to be provided to borrowers of market rate mortgage loans, as language in the disclosure if intended to notify borrowers that they be eligible for a loan with a lower interest rate from another lender. When the 2023 Declared Rate was set in November 2022, the 30-Year Fixed Rate Conforming Mortgage Index rate was 7.053%, exceeding the 2023 Declared Rate Threshold.
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 not provide the disclosure for “high rate” loans. This update will remain in effect until the order for suspension expires on July 1, 2023 or the Commissioner issues a new order.
* Order to suspend extended through December 31, 2023. To view, click here.
