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Unformatted text preview: ssibility of negative amortization. REQUIREMENTS
The Regulation Z amendments require creditors to distribute to consumers an educational booklet about adjustable rate mortgages, and to provide a detailed description of the variable rate feature, along with a historical example. Application – The amendments apply only to closed–end credit transactions secured by the consumer's principal dwelling, including both purchase money and non–purchase money, for terms of more than one year. Timing – The information must be provided • • At the time an application form is given to the consumer or Before the consumer pays a non–refundable fee, whichever is earlier. Disclosure at this time is possible under the amendments because the new rule requires that disclosure reflect ARM loan program features, but not the terms of individual transactions. 9-26 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 9: FIXED RATE MORTGAGE AND ALTERNATIVE MORTGAGE INSTRUMENTS
Two Disclosures – Under the new rule, the variable–rate disclosures are given to consumers earlier than the standard Truth in lending information. The later Truth in lending disclosures must include a statement that an adjustable–rate feature exists and that the variable–rate disclosures have been provided to the consumer. DISCLOSURE CONTENTS
Educational Booklet –The Federal Reserve's Consumer Handbook on Adjustable Rate Mortgages or another booklet containing comparable information must be provided by the lender to a prospective borrower at the time an application form is given to the consumer or before the consumer pays a non–refundable fee, whichever is earlier. ARM Features – Creditors are required to specify the following: • • • The index to which interest rate changes are tied A source of information about the index An explanation of how the interest rate and payment will be determined, for example, a statement that the interest r...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10