Reg Z (R-1366) MDIA II IFRM PR

Printer Version - Board of Governors of the Federal Reserve System

Page 1 of 1

Press Release

Release Date: December 22, 2010
For immediate release
The Federal Reserve Board on Wednesday approved an interim rule amending Regulation Z, which
implements the Truth in Lending Act (TILA). The Board is issuing this interim rule to clarify
certain aspects of a September 24, 2010 interim rule, in response to public comments. The
September interim rule implements provisions of the Mortgage Disclosure Improvement Act
(MDIA) which amended TILA to require mortgage lenders to disclose examples of how a loan's
interest rate or monthly payments can change. Those statutory amendments will become effective
on January 30, 2011.
The MDIA seeks to alert borrowers to the risks of payment increases before they take out mortgage
loans with variable rates or payments. Under the Board's September interim rule, lenders' cost
disclosures must include a payment summary in the form of a table stating the initial rate and
corresponding periodic payment and, for adjustable rate loans, the maximum rate and payment that
can occur during the first five years as well as a "worst case" example showing the maximum rate
and payment possible over the life of the loan.
This interim rule clarifies that creditors' disclosure should reflect the first rate adjustment for a "5/1
ARM" loan because the new rate typically becomes effective within 5 years after the first regular
payment due date. Today's interim rule also corrects the requirements for interest-only loans to
clarify that creditors' disclosures should show the earliest date the consumer's interest rate can
change rather than the due date for making the first payment under the new rate. The rule also
clarifies which mortgage transactions are covered by the special disclosure requirements for loans
that allow minimum payments that cause the loan balance to increase.
Creditors have the option of complying with either the Board's September 2010 interim rule as
originally published or as revised by this interim rule until October 1, 2011, at which time
compliance with this interim rule will become mandatory.
The Board is soliciting comment on the interim rule for 60 days after publication in the Federal
Register, which is expected shortly. The Board's notice is attached.
Attachment (76 KB PDF)

http://www.federalreserve.gov/newsevents/press/bcreg/20101222a.htm

12/22/2010