[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: 12CFR226.33]



[Page 313-314]

 

                       TITLE 12--BANKS AND BANKING

 

                   CHAPTER II--FEDERAL RESERVE SYSTEM

 

PART 226_TRUTH IN LENDING (REGULATION Z)--Table of Contents

 

     Subpart E_Special Rules for Certain Home Mortgage Transactions

 

Sec. 226.33  Requirements for reverse mortgages.



    (a) Definition. For purposes of this subpart, reverse mortgage 

transaction means a nonrecourse consumer credit obligation in which:

    (1) A mortgage, deed of trust, or equivalent consensual security 

interest securing one or more advances is created in the consumer's 

principal dwelling; and

    (2) Any principal, interest, or shared appreciation or equity is due 

and payable (other than in the case of default) only after:

    (i) The consumer dies;

    (ii) The dwelling is transferred; or

    (iii) The consumer ceases to occupy the dwelling as a principal 

dwelling.

    (b) Content of disclosures. In addition to other disclosures 

required by this part, in a reverse mortgage transaction the creditor 

shall provide the following disclosures in a form substantially similar 

to the model form found in paragraph (d) of Appendix K of this part:

    (1) Notice. A statement that the consumer is not obligated to 

complete the reverse mortgage transaction merely because the consumer 

has received the disclosures required by this section or has signed an 

application for a reverse mortgage loan.

    (2) Total annual loan cost rates. A good-faith projection of the 

total cost of the credit, determined in accordance with paragraph (c) of 

this section and expressed as a table of ``total annual loan cost 

rates,'' using that term, in accordance with Appendix K of this part.

    (3) Itemization of pertinent information. An itemization of loan 

terms, charges, the age of the youngest borrower and the appraised 

property value.

    (4) Explanation of table. An explanation of the table of total 

annual loan cost rates as provided in the model form found in paragraph 

(d) of Appendix K of this part.

    (c) Projected total cost of credit. The projected total cost of 

credit shall reflect the following factors, as applicable:

    (1) Costs to consumer. All costs and charges to the consumer, 

including the costs of any annuity the consumer purchases as part of the 

reverse mortgage transaction.

    (2) Payments to consumer. All advances to and for the benefit of the 

consumer, including annuity payments that the consumer will receive from 

an annuity that the consumer purchases as part of the reverse mortgage 

transaction.

    (3) Additional creditor compensation. Any shared appreciation or 

equity in the dwelling that the creditor is entitled by contract to 

receive.



[[Page 314]]



    (4) Limitations on consumer liability. Any limitation on the 

consumer's liability (such as nonrecourse limits and equity conservation 

agreements).

    (5) Assumed annual appreciation rates. Each of the following assumed 

annual appreciation rates for the dwelling:

    (i) 0 percent.

    (ii) 4 percent.

    (iii) 8 percent.

    (6) Assumed loan period. (i) Each of the following assumed loan 

periods, as provided in Appendix L of this part:

    (A) Two years.

    (B) The actuarial life expectancy of the consumer to become 

obligated on the reverse mortgage transaction (as of that consumer's 

most recent birthday). In the case of multiple consumers, the period 

shall be the actuarial life expectancy of the youngest consumer (as of 

that consumer's most recent birthday).

    (C) The actuarial life expectancy specified by paragraph 

(c)(6)(i)(B) of this section, multiplied by a factor of 1.4 and rounded 

to the nearest full year.

    (ii) At the creditor's option, the actuarial life expectancy 

specified by paragraph (c)(6)(i)(B) of this section, multiplied by a 

factor of .5 and rounded to the nearest full year.