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Home > News & Events > Press Releases

Press Release
July 23, 2009

Federal Reserve proposes significant changes to
Regulation Z (Truth in Lending) intended to
improve the disclosures consumers receive in
connection with closed-end mortgages and
home-equity lines of credit
For immediate release
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The Federal Reserve Board on Thursday proposed significant changes
to Regulation Z (Truth in Lending) intended to improve the disclosures
consumers receive in connection with closed-end mortgages and homeequity lines of credit (HELOCs). These changes, offered for public
comment, reflect the result of consumer testing conducted as part of the
Board's comprehensive review of the rules for home-secured credit. The
amendments would also provide new consumer protections for all homesecured credit.
"Consumers need the proper tools to determine whether a particular
mortgage loan is appropriate for their circumstances," said Federal
Reserve Chairman Ben S. Bernanke. "It is often said that a home is a
family's most important asset, and it is the Federal Reserve's
responsibility to see that borrowers receive the information they need to
protect that asset."
To shop for and understand the cost of credit, consumers must be able
to identify and understand the key terms of the mortgage. In formulating
the proposed revisions to Regulation Z, the Board used consumer
testing to ensure that the most essential information is provided at a

suitable time using content and formats that are clear and conspicuous.
"Our goal is to ensure that consumers receive the information they need,
whether they are applying for a fixed-rate mortgage with level payments
for 30 years, or an adjustable-rate mortgage with low initial payments
that can increase sharply," said Governor Elizabeth A. Duke. "With this
in mind, the disclosures would be revised to highlight potentially risky
features such as adjustable rates, prepayment penalties, and negative
amortization."
Closed-end mortgage disclosures would be revised to highlight
potentially risky features such as adjustable rates, prepayment
penalties, and negative amortization. The Board's proposal would:
Improve the disclosure of the annual percentage rate (APR) so it
captures most fees and settlement costs paid by consumers;
Require lenders to show how the consumer's APR compares to
the average rate offered to borrowers with excellent credit;
Require lenders to provide final Truth in Lending Act (TILA)
disclosures so that consumers receive them at least three
business days before loan closing; and
Require lenders to show consumers how much their monthly
payments might increase, for adjustable-rate mortgages.
The Board will also work with the Department of Housing and Urban
Development to make the disclosures mandated by TILA, and HUD's
disclosures, required by the Real Estate Settlement Procedures Act,
complementary; potentially developing a single disclosure form that
creditors could use to satisfy both laws.
In developing the proposed amendments, the Board recognized that
disclosures alone may not always be sufficient to protect consumers
from unfair practices. To prevent mortgage loan originators from
"steering" consumers to more expensive loans, the Board's proposal
would:
Prohibit payments to a mortgage broker or a loan officer that are
based on the loan's interest rate or other terms; and
Prohibit a mortgage broker or loan officer from "steering"
consumers to transactions that are not in their interest in order to
increase the mortgage broker's or loan officer's compensation.
The rules for home-equity lines of credit would be revised to change the
timing, content, and format of the disclosures that creditors provide to
consumers at application and throughout the life of such accounts.
Currently, consumers receive lengthy, generic disclosures at application.
Under the proposal, consumers would receive a new one-page Board
publication summarizing basic information and risks regarding HELOCs
at application. Shortly after application, consumers would receive new
disclosures that reflect the specific terms of their credit plans. In
addition, the Board's proposal would:
Prohibit creditors from terminating an account for payment-related
reasons unless the consumer is more than 30 days late in making
a payment.

Provide additional protections related to account suspensions and
credit-limit reductions, and reinstatement of accounts.
The Federal Register notices are attached. The comment periods end
120 days after publication of the proposals in the Federal Register,
which is expected shortly.
Highlights of Proposed Rules Regarding Home-Secured Credit (21 KB
PDF)
Statement by Chairman Ben S. Bernanke
Statement by Governor Elizabeth A. Duke
Board Memorandum--Proposed Amendments to Regulation Z (Truth in
Lending) (422 KB PDF)
Regulation Z--HELOC:
Federal Register notice, Regulation Z--HELOC: HTML | 5.35 MB PDF
Key Questions to Ask About Home Equity Lines of Credit (Attachment A)
(71 KB PDF)
Summary of Findings: Design and Testing of Truth in Lending
Disclosures for Home Equity Lines of Credit (1.29 MB PDF)
Model forms and samples:
1. G-14(A) (144 KB PDF) Early Disclosure Model Form (Homeequity Plans)
2. G-14(B) (169 KB PDF) Early Disclosure Model Form (Homeequity Plans)
3. G-14(C) (233 KB PDF) Early Disclosure Sample (Home-equity
Plans)
4. G-14(D) (226 KB PDF) Early Disclosure Sample (Home-equity
Plans)
5. G-14(E) (209 KB PDF) Early Disclosure Sample (Home-equity
Plans)
6. G-15(A) (140 KB PDF) Account-Opening Disclosure Model Form
(Home-equity Plans)
7. G-15(B) (234 KB PDF) Account-Opening Disclosure Sample
(Home-equity Plans)
8. G-15(C) (232 KB PDF) Account-Opening Disclosure Sample
(Home-equity Plans)
9. G-15(D) (233 KB PDF) Account-Opening Disclosure Sample
(Home-equity Plans)
10. G-24(A) (133 KB PDF) Periodic Statement Transactions; Interest
Charges; Fees Sample (Home-equity Plans)
11. G-24(B) (187 KB PDF) Periodic Statement Sample (Home-equity
Plans)
12. G-24(C) (156 KB PDF) Periodic Statement Sample (Home-equity
Plans)
13. G-25 (12 KB PDF) Change-in-Terms Sample (Home-equity
Plans)
14. G-26 (11 KB PDF) Rate Increase Sample (Home-equity Plans)

Regulation Z--Closed-end Mortgages:
Federal Register notice, Regulation Z--Closed-end Mortgages: HTML |
6.09 MB PDF
Key Questions to Ask About Your Mortgage (Attachment A) (69 KB
PDF)
Fixed vs. Adjustable Rate Mortgages Early Disclosure (Attachment B)
(80 KB PDF)
Summary of Findings: Design and Testing of Truth in Lending
Disclosures for Closed-end Mortgages (2.55 MB PDF)
Model forms and samples:
1. H–4(B) (96 KB PDF) Adjustable-Rate Loan Program Model Form
2. H–4(D) (92 KB PDF) Adjustable-Rate Loan Program Sample
(Hybrid ARM)
3. H–4(E) (93 KB PDF) Adjustable-Rate Loan Program Sample
(Interest Only ARM)
4. H–4(F) (93 KB PDF) Adjustable-Rate Loan Program Sample
(Payment Option ARM)
5. H-4(G) (63 KB PDF) Adjustable-Rate Adjustment Notice Model
Form
6. H–4(I) (107 KB PDF) Adjustable-Rate Adjustment Notice Sample
(Interest Only ARM)
7. H–4(J) (106 KB PDF) Adjustable-Rate Adjustment Notice Sample
(Hybrid ARM)
8. H–4(K) (54 KB PDF) Adjustable-Rate Annual Notice Model Form
9. H–4(L) (116 KB PDF) Negative Amortization Monthly Disclosure
Model Form
10. H-19(A) (161 KB PDF) Fixed Rate Mortgage Model Form
11. H-19(B) (150 KB PDF) Adjustable-Rate Mortgage Model Form
12. H-19(C) (169 KB PDF) Mortgage with Negative Amortization
Model Form
13. H-19(D) (169 KB PDF) Fixed Rate Mortgage with Balloon
Payment Sample
14. H-19(E) (215 KB PDF) Fixed Rate Mortgage with Interest Only
Sample
15. H-19(F) (164 KB PDF) Step-Payment Mortgage Sample
16. H-19(G) (218 KB PDF) Hybrid Adjustable-Rate Mortgage Sample
17. H-19(H) (204 KB PDF) Adjustable-Rate Mortgage with Interest
Only Sample
18. H-19(I) (151 KB PDF) Adjustable-Rate Mortgage with Payment
Option Sample

Last Update: August 26, 2009

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