Sec. 226.19 Certain mortgage and
variable-rate transactions.
The Federal Reserve Board's Regulation Z (12 CFR Part 226) has been republished effective December 30, 2011, at 12 CFR Part 1026 as one of the regulations transferred to the Consumer Financial Protection Bureau under the Dodd-Frank Act. This section of the FRB regulation was republished as §1026.19 of the Bureau's regulation.
(a) Mortgage transactions subject to RESPA----(1)(i) Time of disclosures. In a
mortgage transaction subject to the Real Estate Settlement Procedures Act (12 U.S.C.
2601 et seq.) that is secured by the consumer’s dwelling, other than a home equity line of
credit subject to § 226.5b or mortgage transaction subject to paragraph (a)(5) of this
section, the creditor shall make good faith estimates of the disclosures required by
§ 226.18 and shall deliver or place them in the mail not later than the third business day
after the creditor receives the consumer’s written application.
(ii) Imposition of fees. Except as provided in paragraph (a)(1)(iii) of this section, neither a creditor nor any other person may impose a fee on the consumer in connection with the consumer's application for a mortgage transaction subject to paragraph (a)(1)(i) of this section before the consumer has received the disclosures required by paragraph (a)(1)(i) of this section. If the disclosures are mailed to the consumer, the consumer is considered to have received them three business days after they are mailed.
(iii) Exception to fee restriction. A creditor or other person may impose a fee for obtaining the consumer's credit history before the consumer has received the disclosures required by paragraph (a)(1)(i) of this section, provided the fee is bona fide and reasonable in amount.
(2) Waiting periods for early disclosures and corrected disclosures. (i) The creditor
shall deliver or place in the mail the good faith estimates required by paragraph (a)(1)(i)
of this section not later than the seventh business day before consummation of the
transaction.
(ii) If the annual percentage rate disclosed under paragraph (a)(1)(i) of this section
becomes inaccurate, as defined in § 226.22, the creditor shall provide corrected
disclosures with all changed terms. The consumer must receive the corrected disclosures
no later than three business days before consummation. If the corrected disclosures are
mailed to the consumer or delivered to the consumer by means other than delivery in
person, the consumer is deemed to have received the corrected disclosures three business
days after they are mailed or delivered.
(3) Consumer’s waiver of waiting period before consummation. If the consumer
determines that the extension of credit is needed to meet a bona fide personal financial
emergency, the consumer may modify or waive the seven-business-day waiting period or
the three-business-day waiting period required by paragraph (a)(2) of this section, after
receiving the disclosures required by § 226.18. To modify or waive a waiting period, the
consumer shall give the creditor a dated written statement that describes the emergency,
specifically modifies or waives the waiting period, and bears the signature of all the
consumers who are primarily liable on the legal obligation. Printed forms for this
purpose are prohibited.
(4) Notice. Disclosures made pursuant to paragraph (a)(1) or paragraph (a)(2) of this
section shall contain the following statement: “You are not required to complete this
agreement merely because you have received these disclosures or signed a loan
application.” The disclosure required by this paragraph shall be grouped together with
the disclosures required by paragraphs (a)(1) or (a)(2) of this section.
(5) Timeshare plans. In a mortgage transaction subject to the Real Estate Settlement
Procedures Act (12 U.S.C. 2601 et seq.) that is secured by a consumer’s interest in a
timeshare plan described in 11 U.S.C. 101(53D)):
(i) The requirements of paragraphs (a)(1) through (a)(4) of this section do not apply;
(ii) 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; and
(iii) If the annual percentage rate at the time of consummation varies from the annual
percentage rate disclosed under paragraph (a)(5)(ii) of this section 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 § 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 value. The example shall relect 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
examply in paragraph (b)(2)(viii)(A) of this section; or
(B) The initital 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.
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