Under Vt. Stat. Ann. tit 32, § 3108 (establishment of interest rates), the Vermont Commissioner of Taxes is required to set interest rates no later than December 15th of each year with rates that become effective on January 1st of the following year and apply to interest that accrues in that calendar year. On November 1, 2023, the Vermont Commissioner of Taxes issued a memorandum on interest rates for 2024. The memorandum announced that the annual rate for overpayment of taxes (the “Declared Rate”) for 2024 will be 8.00%. Similarly, the annual interest rate for underpayment of tax will also be 8.00%.
The Declared Rate is used to determine whether a loan is considered a “High Rate / High Point loan” subject to Vermont’s anti-predatory lending law. A first-lien, residential loan in Vermont is “High Rate” if the interest rate for the loan exceeds the adjusted Declared Rate by more than three percent (3%). For more information, reference DocMagic’s High Cost Memo on the Vermont High Rate / High Point Law.
The Declared Rate is found by rounding the average prime loan rate (as determined by the Board of Governors of the Federal Reserve System) to the nearest quarter of a percent. The average prime loan rate for the 12-month period beginning October 1, 2022 and ending September 30, 2023 was 7.78%, resulting in a Declared Rate of 8.00% for calendar year 2024.
The announcement of the 2024 Declared Rate follows an order of suspension of disclosure requirements for High Rate Mortgage Loans from the Vermont Department of Financial Regulation that was first issued in May 2022 through December 2022, and then extended again through December 31, 2023.
When the Declared Rate was set for calendar year 2022, the 30-year fixed conforming mortgage index rate was 3.269% so a high-rate mortgage disclosure was required for a first-lien mortgage loan with an interest rate exceeding 6.25% (the “Declared Threshold”). By May 2022, the same 30-year fixed conforming index rate had increased to 5.486%, a jump of almost seventy percent. This upward trend continued in 2023. The Declared Rate for 2023 was established as 3.96%, resulting in a disclosure threshold of 6.96%. As of June 7, 2023 the 30-Year Fixed Rate Conforming Mortgage Index rate was 6.746%.
Because the prevailing mortgage rate was so close to the disclosure threshold, Vermont chose to temporarily suspend the disclosure requirement for “High-Rate” mortgage loans in the best interest of the public. It was determined that the disclosure may be misleading to borrowers by stating that they may be eligible for a loan with a lower interest rate from another lender.
Accordingly, DocMagic has not provided the Vermont High Rate, High Point Disclosure (Form ID: VTHRHP.DSC) when applicable for “High-Rate” loans while the temporary order to suspend has been in effect. However, the order to suspend the disclosure requirement as it applies to “High-Rate” loans expires on January 1, 2024. After that date, DocMagic will once again provide the Vermont High Rate, High Point Disclosure as applicable for both high-rate and high-point loans. The disclosure will also be updated to reflect the new Declared Rate of 8.00%.
DocMagic will also be updating the Vermont High Rate High Point Audit and Rule to reflect the new declared rate adjustment as of the January 1, 2024 effective date.
