I was looking at some of the comment letters that were submitted to the FRB and thought the following letter raised many interesting points.

http://www.federalreserve.gov/SECRS/2010...186997245_1.pdf

I haven't finished reading the interim rule.

I was hoping for clarification (actually, a sanity check). These new rules eff. 1/30/11...they would include home equity loans, correct? What about HELOCs - they were excluded in the May 2009 finals (included only loans subject to RESPA then)? It sounds as though HE loans are subject to the 1/30/11 rules but not HELOCs and I just need someone to set me straight. THANK YOU!!

The amendments affect a "closed-end transaction secured by real property or a dwelling, other than a transaction secured by a consumer’s interest in a timeshare plan." [Regulation Z, §226.18(s), added with mandatory compliance for transactions for which applications are received on or after 1/30/2011. Emphasis added.]

Is this correct? I just read the "fixed rate, fixed payment loans" section in the Sept 24th Federal Register and if I am reading it correctly even our plain jane mortgage loans - interest rate and payments can't change - have to get rid of the payment stream area on the TIL and replace with H-4(E)?

I guess this would be on both the ETIL that is given for MDIA purposes and the Final TIL at signing.


2nd question: We do balloon mortgage - 30 due in 15. The H-4(J) Balloon payment model clause....where does that get inserted? Do i still use the H-4(E) and just add the clause at the bottom?

Thank you for your assistance

I would like to confirm whether construction-only (not permanent financing) would be covered under the revised rules. I saw a couple of posts in this thread but not sure there was a conclusion or agreement on the understanding. The rules implement MDIA which covered loans also subject to RESPA. A construction only or temporary financing loan would not be subject to RESPA however these interim rules expanded to include land only which also has been exempt from RESPA (if not planning to construct a structure within 2 years). Should we also include construction-only and temporary financing loans for these new disclosures if secured by a dwelling? Just want to be sure we're not overlooking something. Thank you for your help.

For our branch equity loans, we don't offer escrow and we don't require MI so I wanted to ask about Way Out West's comment back in September. He said that the payment streams disclosed on the printed disclosure will most likely not be the payment streams used to calculate the APR itself.

I am not sure what is meant by that statement. I have read through the interim rule and I don't know what I need to do with regard to the APR calculation.

Thank you.

I believe that you will calculate your APR on 1/30/11 the same way you calculate it today. The same goes for the way your system calculates the "total of payments" in the Fed. Box. The new rule is just changing the way you display payments. A customer will not be able to multiply out the payments in the new rate and payment summary table and arrive at the "total of payments" disclosed in the Fed. Box. There is no disclosure of the actual number of payments anymore. I am thinking that you will want your software system to give you some type of output document for your file that you can use to recalculate the "total of payments."

I am struggling here with how to handle preferred rate loans with this new table. I'm think of using the discounted rate in the new table and then making a variable rate disclosure under section 226.18(f) to show how the rate and payment could change if the condition that gave rise to the preferred rate is no longer valid (i.e; employment terminated or no longer maintains a checking account for automatic payments). Has anyone else considered this?

Thanks Reads Regs. I had not thought about the fact that there is no # of payments displayed, no date of 1st payment and no final payment $ amount due to the payment not being evenly divided amongst the term.

I read a few weeks ago that some banking organization are asking the FED to not approve this from interim to final ruling. Is there a chance this won't become final? Anyone waiting for a final ruling before having IT work on this?

Bump.

FRB just announced an interim rule to further clarify the 9/24/10 interim rule to amend Reg. Z regarding the MDIA rate and payment table summary. http://www.federalreserve.gov/newsevents/press/bcreg/20101222a.htm

Help me understand: The 1/30/11 requirements are still in affect, but they are adding/clarifying more that doesn't have to be implemented until 10/1/11? Is that how everyone reads this?

The Press Release states:
http://www.federalreserve.gov/newsevents/press/bcreg/20101222a.htm
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.

Here's the 1st paragraph of the press 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 text of the notice that will be published in the Federal Register says "This interim rule is effective January 30, 2011. Compliance with its provisions is optional, however, for transactions for which an application for credit is received by the creditor before October 1, 2011."

My take on this is that if your systems have been modified to comply with the 9/24/10 rule and you generate disclosures for covered loan applications received on or after 1/30/11 based on that rule then you would be in compliance. If you can get your systems modified to comply with the interim rule announced today, you can do so anytime between 1/30/11 and 9/30/11. You must comply with this new interim rule for any covered loan applications received on or after October 1, 2011.

The interim rules (Sept version) are effective 1-30-11. The bank can either comply with both the interim rules and the new clarification interim rules 1-30-11 or the bank can delay the new interim clarification until 10-1-11.

David,
Are we reading too much into these dates, or not enough? Our vendors have stalled on creating the documents to comply with the Sept 24, 2010 interim rule, and are now congratulating themselves that they did not "rush" into it. One of our departments thinks that both interim rules are optional until October 1, 2010; another department thinks that they need to proceed with the ill-created, but otherwise "required" forms ON January 31. HELP!!!

You can only delay the new interim clarification, not the original interim rule (Sept).

I just know I'm going to misinterpret these rules, interim rules, partial changes, etc. or just get them confused Am I the only one anticipating that a psych ward might be needed soon?

Anyway...thanks for the "heads up" on this interim rule, and the attempt at the explanation of dates.

So, does this mean compliance not required until 10/1/11 for the ARMS, interest only and negative amortization products, but every other loan product has to be compliance by 1/30/11? Still not clear...

That's what it sounds like to me too, compliee. It appears it is all related to ARM/VRL-type loans and neg am loans.

That was my first read as well, but I don't believe this is correct. I believe you must comply with the Sept 2010 changes by 1/31/11./ You can optionally comply with the new changes (announced today) or you can wait until 10/1/11 on them.

Wish they would state it that clearly.

There is also clarification on how to disclose a combined construction/permanent loan.

Anyone???

Wouldn't it be H-4F minus the first column?

I do wish someone would answer you - I'm waiting for the same answer. In looking through some past automatic payment threads, it appears some banks do not even consider them "variable rate" loans. But to me they are.

it sounds like a logical process. Either of those scenarios would constitute a VRL but since the event would have to happen in order to trigger the change, how on earth do you give a change date!

I'm glad we discontinued these long ago due to the VRL status of such loans...good luck to you both!