N.Y. Comp. Codes R. & Regs. tit. 3 § 38.5

Current through Register Vol. 46, No. 51, December 18, 2024

Section 38.5 - Prevailing rate

(a) Disclosures. A licensee or exempt organization may issue a "prevailing rate" commitment only in compliance with this section. Prior to acceptance of a commitment fee, points or other discounts, the licensee or exempt organization must issue a commitment which discloses the following:

(1) All disclosures required by section 38.4(a) of this Part excluding information concerning the initial interest rate, and the initial monthly payment of principal and interest.

(2)

(i) Index and margin. The index and margin, if any, upon which the rate for that mortgage loan will be based. The index must be independently verifiable by the borrower and identification of a source for such verification shall be provided. The commitment must also disclose any points or other discounts; or

(ii) Base rate and deviation. A base rate and the maximum interest rate at which the loan may close. The interest rate at closing may never exceed one percentage point above the base rate. The interest rate may be adjusted downward at any time. For example, if the commitment sets a base rate of 9.5 percent, the rate may float no higher than 10.5 percent. A mortgage banker or exempt organization which offers prevailing rate commitments in accordance with this paragraph shall make available for inspection a list which identifies specific products and the rate at which such products are available on any day ("rate sheet"). Such rate sheet shall be maintained for two years.

(b) Procedures.

(1) In connection with a prevailing rate commitment for which a commitment fee is accepted prior to closing, a lender may offer a lower initial or introductory rate to a borrower as long as the index and any margin or the description for the adjusted rate is provided in accordance with this section.

(2) A licensee or exempt organization may issue a commitment which specifies that a rate will be determined at or prior to the closing date without disclosing the index and margin or base rate and deviation as provided above, only if no commitment fee, origination fee, points or other discounts are accepted prior to the fixing of the rate. A prevailing rate offered pursuant to this section must be reasonably related to market conditions at the time of the fixing of the rate.

(3) Nothing contained herein shall relieve the licensee or exempt organization from disclosing in the commitment any other item required by section 38.4(a) of this Part, including fees, points or other discounts or settlement costs.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 38.5