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e-CFR
Data is current as of May 22, 2008

Title 12:
Banks and Banking
PART 226—TRUTH IN LENDING (REGULATION Z)

Subpart C—Closed-End Credit

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§ 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 §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 than1/8of 1 percentage point in a regular
transaction or more than1/4of 1 percentage point in an irregular
transaction, as defined in §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.

(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.

(c) Electronic disclosures. For an application that is accessed
by the consumer in electronic form, the disclosures required by paragraph
(b) of this section may be provided to the consumer in electronic form on
or with the application.

[Reg. Z, 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; 72 FR
63474, Nov. 9, 2007]

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