Higher-Priced Mortgage Loans
New TILA Regulation
Effective October 1, 2009
In July 2008, the Board of Governors of the Federal Reserve System issued a final rule
amending Regulation Z, the implementing regulation of the Truth-in-Lending Act. The
rule includes consumer protections that apply to a new category of higher-priced
mortgage loans (HPMLs). This new category of loans is effective with a pplications dated
on or after October 1, 2009.
Regulation Z defines an HPML as a first mortgage secured by the borrower s principal
residence with an annual percentage rate (APR) that is at least 1.5% higher than the
average prime offer rate (APOR) for a comparable transaction as of the rate lock date.
The APOR is a weekly index that is calculated and published by the Federal Reserve
Board. The applicable index can be found on the FFIEC website at www.ffiec.gov.
For example, utilizing the indices published on 9/28/09, the maximum APR at time of
closing for a loan locked this week to be under the APR threshold for a HPML loan would
30 year fixed 6.59 15 year fixed 6.09
3/1 ARM 5.04 5/1 ARM 5.17
7/1 ARM 5.65
For HPMLs there are product restrictions as well as special underwriting requirements.
After careful consideration, Primary Capital has elected to not handle HPML loans. A
review of the current pipeline has shown that less than 1% of the pipeline would fall into
Please be advised that any HPML loan received by Primary Capital will have to be
restructured to fall below the HPML threshold or the loan will be denied.
If you have any questions, please contact your Account Executive.