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Press Release
December 22, 2010

Federal Reserve issues interim rule amending
Regulation Z to clarify certain disclosure
requirements of the Mortgage Disclosure
Improvement Act
For immediate release
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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 MDIA seeks to alert borrowers to the risks of payment increases
before they take out mortgage loans with variable rates or payments.
Under the Board's September interim rule, lenders' cost disclosures
must include a payment summary in the form of a table stating the initial
rate and corresponding periodic payment and, for adjustable rate loans,
the maximum rate and payment that can occur during the first five years
as well as a "worst case" example showing the maximum rate and
payment possible over the life of the loan.
This interim rule clarifies that creditors' disclosure should reflect the first
rate adjustment for a "5/1 ARM" loan because the new rate typically

becomes effective within 5 years after the first regular payment due
date. Today's interim rule also corrects the requirements for interest-only
loans to clarify that creditors' disclosures should show the earliest date
the consumer's interest rate can change rather than the due date for
making the first payment under the new rate. The rule also clarifies
which mortgage transactions are covered by the special disclosure
requirements for loans that allow minimum payments that cause the loan
balance to increase.
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.
The Board is soliciting comment on the interim rule for 60 days after
publication in the Federal Register, which is expected shortly. The
Board's notice is attached.
Federal Register notice: HTML | PDF

Last Update: December 22, 2010

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