When is a home loan a subprime home loan that is subject to the underwriting requirements of Banking Law § 6-m?
A. A “subprime home loan” under Section 6-m is a home loan with a fully-indexed annual percentage rate (APR) that exceeds by more than 175 basis points for a first-lien loan, or by more than 375 basis points for a subordinate-lien loan, the average commitment rate for loans in the northeast region with a duration comparable to that of the loan, as published in the weekly Freddie Mac PMMS in the week prior to the week in which the lender received a completed loan application. Freddie Mac publishes rates for loans with four different durations – 15- and 30-year fixed rate mortgages, the so-called 5/1 hybrid adjustable rate mortgage (i.e. a loan with an initial rate that is fixed for 5 years and which adjusts annually thereafter) and the 1-year adjustable rate mortgage (“ARM”). The statute gives guidance on which Freddie Mac durations should be considered “comparable” to various loans.
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