If the term '1% Down' is used in advertising a loan product, does the term require additional disclosure?

Here are the triggering terms per Reg Z (closed end):

(d) Advertisement of terms that require additional disclosures. (1) Triggering terms. If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (d)(2) of this section:

(i) The amount or percentage of any downpayment.

(ii) The number of payments or period of repayment.

(iii) The amount of any payment.

(iv) The amount of any finance charge.

Since it lists the percentage of any downpayment - 1% down would fall into that category.

The short answer is "possibly."

Official Interpretation of Section 1026.24(a)(1) says in relevant part:

1. Downpayment. i....By virtue of the definition of downpayment in §1026.2, this triggering term is limited to credit sale transactions.

The only time banks engage in credit sale transactions is when they finance the sale of repos, foreclosed real estate, or some other bank-owned property. Banks advertise the sale of repos as they are taken in, but these sales are most often cash & carry (no financing offered.)

So if I am reading this correctly, for a closed end mortgage loan, 1% down would NOT be a trigger term, correct?

Unless you are selling the property being financed (a credit sale transaction), then no, it would not be a trigger term.

That is correct. The only way "1% down" could be a triggering term would be if you owned the property being mortgaged and are financing its sale to the buyer/borrower.

Banks aren't permitted to hold real estate unless it will be used for office space or some other business related purpose. Therefore, it's necessary to sell foreclosed residences and other real property expeditiously. If you have to provide financing in order to unload a property, it's a "credit sale", not a garden variety loan. The same is true when you're disposing of repossessed automobiles and other personal property--if the borrower signs once to buy the property and simultaneously finance the purchase, then it's a credit sale.

thank you!

(d) Advertisement of terms that require additional disclosures. (1) Triggering terms. If any of the following terms is set forth in an advertisement, the advertisement shall meet the requirements of paragraph (d)(2) of this section:

(i) The amount or percentage of any downpayment.

(ii) The number of payments or period of repayment.

(iii) The amount of any payment.

(iv) The amount of any finance charge.

(2) Additional terms. An advertisement stating any of the terms in paragraph (d)(1) of this section shall state the following terms, as applicable (an example of one or more typical extensions of credit with a statement of all the terms applicable to each may be used):

(i) The amount or percentage of the downpayment.

(ii) The terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment.

(iii) The “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact.

24(d) Advertisement of Terms That Require Additional Disclosures
1. General rule. Under §1026.24(d)(1), whenever certain triggering terms appear in credit advertisements, the additional credit terms enumerated in §1026.24(d)(2) must also appear. These provisions apply even if the triggering term is not stated explicitly but may be readily determined from the advertisement. For example, an advertisement may state “80 percent financing available,” which is in fact indicating that a 20 percent downpayment is required.

Oursisnottoreasonwhy: The commentary that Richard referenced in post #2185578 makes it clear that the amount or percentage of any downpayment only applies for a credit sale transaction.

From the commentary to the section of Reg Z you quoted:
"24(d)(1) Triggering Terms
1. Downpayment. i. The dollar amount of a downpayment or a statement of the downpayment as a percentage of the price requires further information. By virtue of the definition of downpayment in §1026.2, this triggering term is limited to credit sale transactions."

The key to avoiding this common misunderstanding is Reg. Z's definition of the word "downpayment." Section 1026.2(a)(18) defines "downpayment" as "an amount, including the value of property used as a trade-in, paid to a seller to reduce the cash price of goods or services purchased in a credit sale transaction." That's it. The definition excludes all other types of credit.

I know that the amount of any payment is a trigger term.....does that include the phrase "interest only"? The amount is unknown.

Probably not (for closed-end), but I think it is debatable.

D. “$1,200 balance payable in 10 equal installments.”

ii. In the last example, the amount of each payment is readily determinable, even though not explicitly stated. But statements such as “monthly payments to suit your needs” or “regular monthly payments” are not deemed to be statements of the amount of any payment.