Transition to average prime offer rates — rate spread. How are the rate spread FAQs affected by the Board’s final rule published on October 24, 2008, 73 FR 63329?
The final rule is effective October 1, 2009. For loans with applications dated on or after that date, the new rules apply. This change affects two of the rate spread FAQs: “Required use of Board-published Treasury security yields” and “Balloon loans — rate spread.” In the former case, average prime offer rates replace Treasury security yields as benchmarks under the new rate spread determination rules. Use of the Board’s average prime offer rates tables, however, is not mandatory for loans subject to the new rules. Lenders may use the methodology published with the tables to determine average prime offer rates. In the latter case, the FAQ remains valid under the new rules for fixed-rate loans. For variable-rate loans subject to the new rules, however, the applicable average prime offer rate is based on the loan’s initial, fixed-rate period, regardless of whether the loan has a balloon feature.
