Cross-collateral Addendum
The Cross-collateral Addendum has been revised to expand its scope. As revised, the Addendum will now carve out the effect of the cross-collateral clause contained in present or future agreements (i.e., mortgages) in order to prevent a violation of Sections 19(a), 32 or 35 of Regulation Z. Such a violation may occur if a borrower has an existing loan secured by
the consumer's dwelling with the same lender who is now extending
another consumer loan (regardless of collateral type) to the borrower. Due
to the operation of a cross-collateral clause contained in the existing
mortgage, the new consumer loan may become a "consumer transaction secured by the consumer's dwelling" subject to
• the early TIL disclosure requirements of Section 19(a) of Reg. Z or
• the high-cost or higher-priced mortgage loan requirements or
limitations relating of Sections 32 or 35 of Reg. Z.
When making a closed-end consumer loan, Lenders may use the Addendum (along with the consumer note) to make the cross-collateral clause ineffective if, with respect to the new loan, the lender does not fulfill the necessary requirements of Sections 19(a), 32 or 35 of Reg. Z. Note that the Secured Debt and Future Advances section of the real estate security instruments do contain such a cross-collateral clause if selected. However, the Fannie Mae/Freddie Mac real estate security instruments do not.
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