The FRB issued an interim Regulation Z rule requiring lenders to disclose how borrowers' regular mortgage payments can change over time. The interim rule requires lenders to disclose, in tabular format, (1) the initial interest rate and corresponding monthly payment, (2) for adjustable-rate or step-rate loans, the maximum interest rate and payment that can occur during the first five years, and (3) for adjustable-rate and step-rate loans, a "worst case" example showing the maximum rate and payment during the entire term. Lenders must also disclose that consumers may not be able to avoid increased payments by refinancing. The interim rule requires additional disclosures for loans with negative-amortization payment options, introductory interest rates, interest-only payments, and balloon payments. The interim rule is effective 30 days after publication in the Federal Register, but compliance is not mandatory until January 30, 2011. Public comments on the rule are due 30 days after publication in the Federal Register. Click here for a copy of the interim rule.
Alert August 24, 2010