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SB 749

Interest Rates - As enacted, removes the weighted average yield of the accepted offers of the Federal National Mortgage Association's current free market system auction and the 30-year treasury yield as the two bases upon which the maximum effective rate of interest on home loans may be set by the commissioner of financial institutions, and replaces them with the average prime offer rate. - Amends TCA Title 45 and Title 47.

114th Regular Session (2025-2026) Introduced by Ken Yager

Tennessee switches mortgage rate cap calculation from Fannie Mae/Treasury yields to average prime offer rate, affecting home loan accessibility and affordability.

Comp. became Pub. Ch. 290
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Bill Summary · SB 749

Legislative bill overview

SB 749 changes how Tennessee's financial commissioner determines the maximum interest rates allowed on home loans. Instead of using two previous benchmarks (Fannie Mae auction yields and 30-year Treasury yields), the bill requires using the "average prime offer rate"—a market-based lending standard—as the new reference point for setting rate caps.

Why is this important

Interest rate caps directly affect borrowing costs for homebuyers and impact the availability of mortgage credit in Tennessee. Changing the benchmark used to set these caps can either make mortgages more or less accessible depending on how the new metric performs relative to the old ones, potentially affecting housing affordability across the state.

Potential points of contention

  • Market volatility: The average prime offer rate fluctuates based on lender pricing and market conditions, which could create unpredictability in maximum allowable rates compared to the more stable Treasury yield baseline
  • Consumer protection vs. lending availability: Stricter rate caps protect borrowers but may reduce lender willingness to originate loans; looser caps do the opposite—the shift's impact depends on how the new benchmark typically compares to previous ones
  • Implementation clarity: The bill doesn't specify exact methodologies for calculating or applying the average prime offer rate, potentially leaving room for commissioner discretion or interpretation disputes

Compiled from official sources — confirm details with the bill’s official record.

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