Looking for some consensus on the NY subprime test as it relates to the date used to set the threshold. The law reads the PMMS rate in the week prior to the date the good faith estimate was provided and references reg-z.

Reg-z allows/requires the good faith estimate to be revised in certain circumstances. So in the case of an LE going out floating and later locked, the required revised LE date would be used to determine the PMMS rate used for setting the threshold as I interpret it.

It seems there are some investors that think they should be using the initial LE date and not the most recent LE used to set the tolerance. That doesn't seem to hold up to me per the regs, nor make much sense.


NY §6-m. Subprime home loans
(c) "Subprime home loan" means a home loan in which the initial interest rate or the fully-indexed rate, whichever is higher, exceeds by more than one and three-quarters percentage points for a first-lien loan, or by more than three and three-quarters percentage points for a subordinate-lien loan, the average commitment rate for loans in the northeast region with a comparable duration to the duration of such home loan, as published by the Federal Home Loan Mortgage Corporation (herein "Freddie Mac") in its weekly Primary Mortgage Market Survey (PMMS) posted in the week prior to the week in which the lender provides the "good faith estimate" required under 12 USC § 2601 et seq.

[b]§ 1026.19(e)(3)(iv) Revised estimates

For the purpose of determining good faith under paragraph (e)(3)(i) and (ii) of this section, a creditor may use a revised estimate of a charge instead of the estimate of the charge originally disclosed under paragraph (e)(1)(i) of this section if the revision is due to any of the following reasons:

(D) Interest rate dependent charges. The points or lender credits change because the interest rate was not locked when the disclosures required under paragraph (e)(1)(i) of this section were provided. No later than three business days after the date the interest rate is locked, the creditor shall provide a revised version of the disclosures required under paragraph (e)(1)(i) of this section to the consumer with the revised interest rate, the points disclosed pursuant to § 1026.37(f)(1), lender credits, and any other interest rate dependent charges and terms.