[Code of Federal Regulations] [Title 12, Volume 3] [Revised as of January 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 12CFR226.19] [Page 301-302] TITLE 12--BANKS AND BANKING CHAPTER II--FEDERAL RESERVE SYSTEM PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents Subpart C_Closed-End Credit Sec. 226.19 Certain residential mortgage and variable-rate transactions. (a) Residential mortgage transactions subject to RESPA--(1) Time of disclosures. In a residential mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.) the creditor shall make good faith estimates of the disclosures required by Sec. 226.18 before consummation, or shall deliver or place them in the mail not later than three business days after the creditor receives the consumer's written application, whichever is earlier. (2) Redisclosure required. If the annual percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more than \1/8\ of 1 percentage point in a regular transaction or more than \1/4\ of 1 percentage point in an irregular transaction, as defined in Sec. 226.22, the creditor shall disclose all the changed terms no later than consummation or settlement. (b) Certain variable-rate transactions.\45a\ If the annual percentage rate may increase after consummation in a transaction secured by the consumer's principal dwelling with a term greater than one year, the following disclosures must be provided at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier:\45b\ --------------------------------------------------------------------------- \45a\ Information provided in accordance with variable-rate regulations of other federal agencies may be substituted for the disclosures required by paragraph (b) of this section. \45b\ Disclosures may be delivered or placed in the mail not later than three business days following receipt of a consumer's application when the application reaches the creditor by telephone, or through an intermediary agent or broker. --------------------------------------------------------------------------- (1) The booklet titled Consumer Handbook on Adjustable Rate Mortgages published by the Board and the Federal Home Loan Bank Board, or a suitable substitute. (2) A loan program disclosure for each variable-rate program in which the consumer expresses an interest. The following disclosures, as applicable, shall be provided: (i) The fact that the interest rate, payment, or term of the loan can change. (ii) The index or formula used in making adjustments, and a source of information about the index or formula. (iii) An explanation of how the interest rate and payment will be determined, including an explanation of how the index is adjusted, such as by the addition of a margin. [[Page 302]] (iv) A statement that the consumer should ask about the current margin value and current interest rate. (v) The fact that the interest rate will be discounted, and a statement that the consumer should ask about the amount of the interest rate discount. (vi) The frequency of interest rate and payment changes. (vii) Any rules relating to changes in the index, interest rate, payment amount, and outstanding loan balance including, for example, an explanation of interest rate or payment limitations, negative amortization, and interest rate carryover. (viii) At the option of the creditor, either of the following: (A) A historical example, based on a $10,000 loan amount, illustrating how payments and the loan balance would have been affected by interest rate changes implemented according to the terms of the loan program disclosure. The example shall reflect the most recent 15 years of index values. The example shall reflect all significant loan program terms, such as negative amortization, interest rate carryover, interest rate discounts, and interest rate and payment limitations, that would have been affected by the index movement during the period. (B) The maximum interest rate and payment for a $10,000 loan originated at the initial interest rate (index value plus margin, adjusted by the amount of any discount or premium) in effect as of an identified month and year for the loan program disclosure assuming the maximum periodic increases in rates and payments under the program; and the initial interest rate and payment for that loan and a statement that the periodic payment may increase or decrease substantially depending on changes in the rate. (ix) An explanation of how the consumer may calculate the payments for the loan amount to be borrowed based on either: (A) The most recent payment shown in the historical example in paragraph (b)(2)(viii)(A) of this section; or (B) The initial interest rate used to calculate the maximum interest rate and payment in paragraph (b)(2)(viii)(B) of this section. (x) The fact that the loan program contains a demand feature. (xi) The type of information that will be provided in notices of adjustments and the timing of such notices. (xii) A statement that disclosure forms are available for the creditor's other variable-rate loan programs. [52 FR 48670, Dec. 24, 1987; 53 FR 467, Jan. 7, 1988, as amended at 61 FR 49246, Sept. 19, 1996; 62 FR 63443, Dec. 1, 1997]