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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Rules and Regulations
§ 707.6

United States, in accordance with the
following order of precedence:
*
*
*
*
*
■ 4. Revise § 707.5 to read as set forth
below:

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§ 707.5

Incompetency.

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5. Amend § 707.6 by removing the
words ‘‘apply for a payment’’ and
adding, in their place, the words ‘‘apply
for a release of a payment’’.
■ 6. Amend § 707.7 as follows:
■ a. Revise the heading to read as set
forth below, and
■ b. Remove the first sentence and add
in its place the seven sentences set forth
below.
§ 707.7

Release application.

No payment may be made under this
part unless a proper program
application was filed in accordance
with the rules for the program that
generated the payment. That application
must have been timely and filed by
someone legally authorized to act for the
deceased, disappeared, or declaredincompetent person. The filer can be the
party that earned the payment
themselves—such as the case of a
person who filed a program application
before they died—or someone legally
authorized to act for the party that
earned the payment. All program
conditions for payment must have been
met before the death, disappearance, or
incompetency except for the timely
filing of the application for payment by
the person legally authorized to act for
the party earning the payment. But,
further, for the payment to be released
under the rules of this part, a second
application must be filed. That second
application is a release application filed
under this section. In particular, as to
the latter, where all other conditions
have been met, persons desiring to
claim payment for themselves or an
estate in accordance with this part 707
must do so by filing a release
application on Form FSA–325,
‘‘Application for Payment of Amounts
Due Persons Who Have Died,
Disappeared or Have Been Declared
Incompetent.’’ * * *
Signed in Washington, DC, on December
22, 2010.
Jonathan W. Coppess,
Administrator, Farm Service Agency.
[FR Doc. 2010–32760 Filed 12–28–10; 8:45 am]
BILLING CODE 3410–05–P

FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R–1366]

Truth in Lending
Board of Governors of the
Federal Reserve System.

AGENCY:

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Interim rule; request for public
comment.

ACTION:

■

(a) Where any person who would
otherwise be eligible to receive a
payment is adjudged incompetent by a
court of competent jurisdiction before
the payment is received, payment may
be released in accordance with this
section so long as, and only if, a timely
and binding program application has
been filed by the person involved while
capable or by someone legally
authorized to file an application for the
person involved. Timeliness is
determined under the relevant program
regulations. In all cases, the payment
application must have been timely
under the relevant program regulations
and all program conditions for payment
must have been met by or on behalf of
the person involved. However, the
payment will not be made unless, in
addition, a separate release application
is filed in accordance with § 707.7. If
these conditions are met, payment may
be released without regard to the claims
of creditors other than the United States,
to the guardian or committee legally
appointed for the person involved. In
case no guardian or committee had been
appointed, payment, if for not more
than $1,000, may be released without
regard to claims of creditors other than
the United States, to one of the
following in the following order for the
benefit of the person who was the
subject of the adjudication:
(1) The spouse.
(2) An adult son, daughter, or
grandchild.
(3) The mother or father.
(4) An adult brother or sister.
(5) Such person as may be authorized
under State law to receive payment for
the person (see standard procedure
prescribed for the respective region).
(b) In case payment is more than
$1,000, payment may be released only
to such person as may be authorized
under State law to receive payment for
the incompetent, so long as all
conditions for other payments specified
in paragraph (a) of this section and
elsewhere in the applicable regulations
have been met. Those requirements
include the filing of a proper and timely
and legally authorized program
application by or for the person
adjudged incompetent. The release of
funds under this paragraph will be
made without regard to claims of
creditors other than the United States
unless the agency determines otherwise.

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The Board is publishing for
comment an interim rule amending
Regulation Z, which implements the
Truth in Lending Act (TILA). This
interim rule revises the Board’s interim
rule published on September 24, 2010,
which implemented certain
requirements of the Mortgage Disclosure
Improvement Act of 2008. The
September 2010 interim rule requires
creditors who extend consumer credit
secured by real property or a dwelling
to disclose summary information about
interest rates and payment changes in a
tabular format. The Board is issuing this
interim rule to clarify certain provisions
of the September 2010 interim rule.
Specifically, this rule clarifies the
requirements for adjustable-rate
transactions that are ‘‘5/1 ARM’’ loans. It
corrects the requirements for interestonly loans to clarify that the disclosures
should reflect the date of the interest
rate change rather than the date the first
payment is due under the new rate. This
interim rule also revises the definition
of ‘‘negative amortization loans’’ to
clarify which transactions are covered
by the special disclosure requirements
for such loans.
DATES: This interim rule is effective
January 30, 2011. Compliance with its
provisions is optional, however, for
transactions for which an application
for credit is received by the creditor
before October 1, 2011. This interim
rule does not change the January 30,
2011 mandatory compliance date of the
September 2010 interim rule. Comments
on this interim rule must be received on
or before February 28, 2011.
ADDRESSES: You may submit comments,
identified by Docket No. R–1366, by any
of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include the docket number in the
subject line of the message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments will be made
available on the Board’s Web site at
http://www.federalreserve.gov/
SUMMARY:

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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Rules and Regulations
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons. Accordingly, comments will
not be edited to remove any identifying
or contact information. Public
comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Jamie Z. Goodson, Attorney, or Paul
Mondor, Senior Attorney, Division of
Consumer and Community Affairs,
Board of Governors of the Federal
Reserve System, Washington, DC 20551,
at (202) 452–2412 or (202) 452–3667.
For users of Telecommunications
Device for the Deaf (TDD) only, contact
(202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background

srobinson on DSKHWCL6B1PROD with RULES

A. TILA and Regulation Z
Congress enacted the Truth in
Lending Act (TILA) based on findings
that economic stability would be
enhanced and competition among
consumer credit providers would be
strengthened by the informed use of
credit resulting from consumers’
awareness of the cost of credit. One of
the purposes of TILA is to provide
meaningful disclosure of credit terms to
enable consumers to compare credit
terms available in the marketplace more
readily and avoid the uninformed use of
credit.
TILA’s disclosures differ depending
on whether credit is an open-end
(revolving) plan or a closed-end
(installment) loan. TILA also contains
procedural and substantive protections
for consumers. TILA is implemented by
the Board’s Regulation Z. An Official
Staff Commentary interprets the
requirements of Regulation Z. By
statute, creditors that follow in good
faith Board or official staff
interpretations are insulated from civil
liability, criminal penalties, and
administrative sanction.
B. MDIA Amendments to TILA and
Regulation Z
On July 30, 2008, Congress enacted
the Mortgage Disclosure Improvement
Act of 2008 (the MDIA).1 The MDIA
amended TILA and requires transactionspecific TILA disclosures to be provided
within three business days after an
application for a closed-end mortgage
1 The

MDIA is contained in Sections 2501
through 2503 of the Housing and Economic
Recovery Act of 2008, Public Law 110–289, enacted
on July 30, 2008. The MDIA was later amended by
the Emergency Economic Stabilization Act of 2008,
Public Law 110–343, enacted on October 3, 2008.

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loan is received and before the
consumer has paid any fee (other than
a fee for obtaining the consumer’s credit
history).2 Creditors also must mail or
deliver these early TILA disclosures at
least seven business days before
consummation and provide corrected
disclosures if the disclosed APR
changes in excess of a specified
tolerance. The consumer must receive
the corrected disclosures no later than
three business days before
consummation. The MDIA also
expanded coverage of Regulation Z’s
early disclosure requirement to include
loans secured by a dwelling even when
it is not the consumer’s principal
dwelling. The Board implemented these
MDIA requirements in final rules
published May 19, 2009, which became
effective July 30, 2009 as required by the
statute. See 74 FR 23289; May 19, 2009
(MDIA Final Rule).
The MDIA also requires disclosure of
payment examples if the loan’s interest
rate or payments can change, along with
a statement that there is no guarantee
the consumer will be able to refinance
the transaction in the future. Under the
statute, these provisions of the MDIA
will become effective on January 30,
2011. On September 24, 2010, the Board
published an interim rule to implement
these requirements. See 75 FR 58470;
Sept. 24, 2010 (September 2010 Interim
Rule). The Board is issuing this interim
rule to make certain clarifying changes
to provisions in the September 2010
Interim Rule.
II. Summary of the Interim Rule
The MDIA amended TILA to require
creditors to disclose examples of rates
and payments, including the maximum
rate and payment, for loans with
variable rates or payments. The act also
requires creditors to disclose a
statement that consumers should not
assume they can refinance their loans.
On July 23, 2009, the Board published
a proposed rule to revise the disclosure
rules for closed-end credit secured by
real property or a consumer’s dwelling.
See 74 FR 43232; Aug. 26, 2009 (2009
Closed-End Proposal). Among other
things, the 2009 Closed-End Proposal
included provisions to implement
MDIA’s new interest rate and payment
disclosure requirements. Because the
2009 Closed-End Proposal is not
expected to be finalized before the
January 30, 2011 effective date of the
2 The MDIA codified some requirements adopted
by the Board in a July 2008 final rule prior to the
MDIA’s enactment. 73 FR 44522, July 30, 2008
(2008 HOEPA Final Rule). To ease discussion, the
description of the MDIA’s disclosure requirements
includes the requirements of the 2008 HOEPA Final
Rule.

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MDIA disclosure requirements, the
Board issued the September 2010
Interim Rule to provide creditors with
the guidance necessary to comply by the
statutory deadline. The September 2010
Interim Rule is substantially similar to
the provisions of the 2009 Closed-End
Proposal that implemented the interest
rate and payment disclosure
requirements of the MDIA.
Under the September 2010 Interim
Rule, creditors will be required to
disclose in a tabular format the contract
interest rate together with the
corresponding monthly payment,
including an estimated amount for any
escrows for taxes and property and/or
mortgage insurance. Special disclosure
requirements are imposed for
adjustable-rate or step-rate loans to
show the interest rate and payment at
consummation, the maximum interest
rate and payment at any time during the
first five years after consummation, and
the maximum interest rate and payment
possible during the life of the loan.
Additional special disclosures are
required for loans with negativelyamortizing payment options,
introductory interest rates, interest-only
payments, and balloon payments.
Finally, consistent with the statute, the
September 2010 Interim Rule requires
the disclosure of a statement that there
is no guarantee the consumer will be
able to refinance the loan with a new
transaction in the future.
This interim rule clarifies the
requirement in the September 2010
Interim Rule that, for adjustable-rate and
step-rate loans, creditors disclose the
maximum interest rate and payment
during the first five years. As modified
by this rule, creditors must base their
disclosures on the first five years after
the first regular periodic payment due
date, rather than the first five years after
consummation. The clarification is
intended to ensure the disclosures are
consistent with the manner in which
payments are typically structured for
adjustable-rate transactions that are ‘‘5/
1 ARM’’ loans.
In addition, this interim rule clarifies
the requirements for disclosing the
payments on an ‘‘interest-only loan.’’
Under the September 2010 Interim Rule,
for each interest rate disclosed, the
creditor must disclose the earliest date
that rate may apply and the
corresponding periodic payment. For an
interest-only loan, if the corresponding
payment will be applied to both accrued
interest and principal, the September
2010 Interim Rule further requires the
creditor to disclose the earliest date that
such payments will be required. This
interim rule would eliminate the
potential conflict from disclosing two

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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Rules and Regulations

different dates in the same column, by
clarifying that creditors should disclose
the earliest date that the interest rate
becomes effective rather than the date
that the first payment is due under the
new rate.
Also under this interim rule, the
definition of ‘‘negative amortization
loan’’ is being revised to clarify which
transactions are covered by the special
disclosure requirements for such loans.
Those disclosures were designed to
show consumers how their periodic
payments could increase over time and
to enable comparisons between the
consequences for consumers of making
‘‘minimum’’ and ‘‘full’’ payments. The
revision would clarify that these
disclosures apply only to loans where
consumers are allowed to make
minimum payments that result in
negative amortization. Thus, the revised
definition of ‘‘negative amortization
loan’’ excludes loan products that do not
have a minimum required payment that
results in negative amortization. For
example, some loans that are designed
for borrowers with seasonal
employment require level, amortizing
payments, but do not require payments
in certain months; during months when
no payment is made the accrued interest
increases the loan balance. As clarified,
the special disclosure requirements for
negative amortization loans do not
apply to the excluded loans, even
though some negative amortization can
occur because of the capitalization of
accrued interest from time to time. Such
loans will be disclosed under the rules
for amortizing loans.
Finally, this interim rule clarifies how
the provisions in the September 2010
Interim Rule apply to home
construction loans. A new staff
comment accompanying Appendix D
clarifies that, when a construction loan
secured by real property or a dwelling
that may be permanently financed by
the same creditor is disclosed as more
than one transaction, the construction
financing must be disclosed under the
new rules for interest rate and payment
summary tables. On the other hand, if
the creditor discloses the construction
and permanent financing as a single
transaction, the summary table should
reflect only the permanent financing,
while the construction financing should
be disclosed only with a statement
outside the table that interest payments
must be made and the timing of such
payments.
III. Legal Authority
A. Rulemaking Authority
TILA Section 105(a) directs the Board
to prescribe regulations to carry out the

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Act’s purposes. 15 U.S.C. 1604(a). TILA
also authorizes the Board to issue
regulations that contain such
classifications, differentiations, or other
provisions, or that provide for such
adjustments and exceptions for any
class of transactions, that in the Board’s
judgment are necessary or proper to
effectuate the purposes of TILA,
facilitate compliance with the act, or
prevent circumvention or evasion.
B. Authority To Issue Interim Rule
The Administrative Procedures Act
(APA), 5 U.S.C. 551 et seq., generally
requires public notice before
promulgation of regulations. See 5
U.S.C. 553(b). The 2009 Closed-End
Proposal provided the public with
notice and an opportunity to comment
on the Board’s proposed disclosure
changes, including the proposed interest
rate and payment summary tables that
would implement the MDIA. The
September 2010 Interim Rule adopted
only those provisions of the 2009
Closed-End Proposal that implement the
MDIA requirements that will become
effective on January 30, 2011.
Accordingly, the Board believed that the
September 2010 Interim Rule complied
with the APA’s public notice and
opportunity to comment requirement.
The Board adopted the provisions
concerning interest rates and payments
as an interim rule, rather than as a final
rule, because the Board intended to
conduct additional testing of these and
other disclosure requirements,
including quantitative testing, and may
revise the interim provisions further in
light of further testing results. The
Board sought to permit further public
comment while also giving the
provisions effect so that creditors would
have the guidance they need and the
time to implement it by January 30,
2011, as discussed above.
For the same reasons, the Board is
now implementing these clarifications
by interim rule to ensure timely
publication and effectiveness of the
additional guidance it provides before
the statutory requirements become
effective. The additional guidance is
needed to prevent compliance burdens
that otherwise would result from certain
conflicts and uncertainties in the
existing provisions as implemented by
the September 2010 Interim Rule.
Comments on the September 2010
Interim Rule raised additional issues
that are not being addressed at this time.
The Board believes that issuing a
permanent final rule imposing further
changes in creditors’ disclosure so soon
before the mandatory January 30, 2011
compliance date would impose undue
burden on creditors. Accordingly, this

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interim rule is being published only to
clarify certain issues that created
uncertainty for creditors on how to
comply with the September 2010
Interim Rule before the statutory
effective date. Other comments received
on the September 2010 Interim Rule, as
well as this interim rule, can be taken
into consideration before publication of
a permanent final rule.
IV. Overview of Comments Received on
the Interest Rate and Payment
Summary Tables
The September 2010 Interim Rule
provided an overview of comments on
the 2009 Closed-End Proposal. See 75
FR 58470, 58472; Sept. 24, 2010. In
response to the September 2010 Interim
Rule, the Board received 36 comments.
Most of those were from creditors and
their trade associations and formsoftware vendors that provide creditors
with systems to generate disclosures.
They raised various practical concerns
with the new requirements. The
concerns addressed in this interim rule
are described below.
Several commenters expressed
concern about the requirement that the
summary table for adjustable-rate and
step-rate loans include the maximum
rate applicable during the first five years
after consummation. They noted that ‘‘5/
1 ARM’’ loans typically provide for 60
regular periodic payments at the initial
rate and that the rate typically does not
adjust until at least the 61st full month
after consummation. As a result, the
payment summary table as prescribed in
the September 2010 Interim Rule would
not show the rate increase at the first
adjustment of a typical ‘‘5/1 ARM’’ loan
if the table is based on interest rate
changes occurring during the first five
years after consummation.
For interest-only loans, some
commenters questioned the requirement
that creditors disclose the earliest date
on which the new interest rate can
apply as well as the earliest date on
which the corresponding payment
would be due at the new rate. Because
interest is paid in arrears on most
mortgage transactions, those two dates
are generally one month apart.
Commenters noted that the structure of
the table allows for only one date in
each column.
Commenters also asked the Board to
clarify whether certain types of loan
products should be disclosed as
‘‘negative amortization loans.’’ They
noted that some loan products have
features that may result in the principal
balance increasing even though the
consumer does not have the right on
each due date to choose between
making a minimum payment that causes

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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Rules and Regulations
negative amortization and making a
larger payment. For example, some
loans provide for regular, amortizing
payments, but have irregular payment
schedules and periods when no
payment is due, during which accrued
interest is added to the principal
balance. Commenters also noted that
some loans have rates that adjust
without a corresponding adjustment in
the periodic payment in order to
maintain the consumer’s payment at a
level amount; if the interest rate
increases during the loan term, the
principal balance may increase. These
commenters stated that such products
cannot be disclosed as negative
amortization loans under the September
2010 Interim Rule, which calls for
parallel disclosures of the consumer’s
minimum payment and full payment
options.
Many of the commenters asked how
the requirements for the new rate and
payment summary table in § 226.18(s)
affect the guidance in Appendix D for
disclosing multiple-advance
construction loans. Most home
construction loans are covered by
§ 226.18(s) because they are secured by
real property or a dwelling. Specifically,
commenters sought clarification on
whether the guidance in Appendix D for
disclosing the ‘‘repayment schedule’’ for
a construction loan remains applicable
or, alternatively, whether the
requirements of § 226.18(s) override the
existing guidance in Appendix D.
The Board is adopting this interim
rule to address the foregoing four issues.
The Board is also adopting minor,
technical revisions to address other
uncertainties raised by the commenters,
as discussed below.
V. Section-by-Section Analysis
Section 226.18 Content of Disclosures

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18(h) Total of Payments
The Board is revising staff comment
18(h)–2 to clarify how to calculate the
total of payments under § 226.18(h) for
transactions secured by real property or
a dwelling. Existing comment 18(h)–2
states that the total of payments is the
sum of the payments disclosed under
§ 226.18(g). For transactions subject to
§ 226.18(s), however, no payment
schedule will be disclosed under
§ 226.18(g). Accordingly, the Board is
revising comment 18(h)–2 to provide
that creditors should continue to follow
the rules in § 226.18(g) and associated
commentary, and comments 17(c)(1)–8
and –10 for adjustable-rate transactions,
to calculate the total of payments for
transactions secured by real property or
a dwelling.

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18(s) Interest Rate and Payment
Summary for Mortgage Transactions
The Board is adopting new
commentary language to clarify that
references to ‘‘monthly’’ payments in the
disclosures may be modified to reflect
other periods when applicable, such as
when payments are due quarterly
instead of monthly. Section
226.18(s)(2)(i)(B)(1) provides that the
interest rate at consummation must be
disclosed and labeled ‘‘introductory rate
and monthly payment.’’ Under
§§ 226.18(s)(3)(i)(D) and
226.18(s)(3)(ii)(D), for each interest rate
disclosed under § 226.18(s)(2), the
creditor must also disclose the sum of
the corresponding periodic payment
and any estimated escrow payment,
which must be labeled ‘‘total estimated
monthly payment.’’ The Board has also
published model clauses that use the
word ‘‘monthly’’ in describing the
disclosed payments.
Existing comment 18(s)(3)(i)(D)–1
provides that, if periodic payments are
not due monthly, the creditor should
use the appropriate term such as
‘‘quarterly’’ or ‘‘annually.’’ There is no
similar guidance, however under the
other provisions. The Board is revising
comment 18(s)–1 to clarify that the same
guidance applies to
§§ 226.18(s)(2)(i)(B)(1) and
226.18(s)(3)(ii)(D), as well as the model
clauses.
18(s)(2) Interest Rates
18(s)(2)(i) Amortizing Loans
Maximum interest rate during first
five years. The Board is revising
§ 226.18(s)(2)(i)(B)(2) to clarify the rule’s
application to adjustable-rate
transactions that are ‘‘5/1 ARM’’ loans.
As adopted in the September 2010
Interim Rule, § 226.18(s)(2)(i)(B)(2)
requires disclosure of the maximum
possible rate at any time during the first
five years after consummation and the
earliest date that rate may apply. As
noted above, some commenters
questioned whether the Board intended
creditors to disclose the first adjustment
for ‘‘5/1 ARMs’’ under this provision.
Commenters stated the intent of the rule
is unclear because the first rate
adjustment generally occurs more than
five years after consummation. For
example, assuming a ‘‘5/1 ARM’’ loan is
consummated on August 16, 2011, the
first payment due date typically is
October 1, 2011. The first rate
adjustment then occurs on the due date
of the 60th regular payment, September
1, 2016, which is more than five years
after consummation. The Board
intended that creditors disclose the first
rate adjustment for a ‘‘5/1 ARM.’’ To

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81839

ensure that the first rate adjustment will
be disclosed for ‘‘5/1 ARMs,’’ the Board
is revising § 226.18(s)(2)(i)(B)(2) to
clarify that creditors should disclosure
the maximum possible rate that will
apply at any time during the first five
years after the date on which the first
regular periodic payment will be due,
rather than after consummation.
Payment increases without regard to
an interest rate adjustment. The Board
is revising comment 18(s)(2)(i)(C)–1 to
clarify that, for interest-only loans,
creditors must disclose the change in
the periodic payment when the
consumer begins making payments that
include principal as well as interest.
Under § 226.18(s)(2)(i)(C), if an
amortizing loan provides for a payment
increase without regard to an interest
rate adjustment (as described in
§ 226.18(s)(3)(i)(B)), the creditor must
disclose an additional column showing
the rate in effect at the time of such a
payment increase and the date on which
the payment increase will occur. Some
commenters suggested that this
additional column would not be
required for an interest-only loan to
show the change in the periodic
payment when the consumer begins
making payments that include
principal. These commenters believe
that, under the September 2010 Interim
Rule, § 226.18(s)(3)(i)(B) does not apply
to interest-only loans. In fact, the
disclosure requirement of
§ 226.18(s)(2)(i)(C) applies to all
amortizing loans, including interestonly loans, if the consumer’s payment
can increase in the manner described in
§ 226.18(s)(3)(i)(B), even if it is not the
type of loan covered by § 226.18(s)(3)(i).
In such a case, if the transaction is an
interest-only loan, the creditor also must
disclose the corresponding periodic
payment pursuant to § 226.18(s)(3)(ii).
The Board is revising comment
18(s)(2)(i)(C)–1 to clarify this point. The
Board is also revising this comment to
clarify that payment increases without
regard to an interest rate increase do not
include minor payment variations
resulting solely from the fact that
months have different numbers of days.
18(s)(3) Payments for Amortizing Loans
18(s)(3)(i) Principal and Interest
Payments
Escrows. The Board is revising
§ 226.18(s)(3)(i)(C) to clarify when
creditors must disclose estimated
payments for taxes and insurance.
Under § 226.18(s)(3)(i)(C) and
accompanying comment 18(s)(3)(i)(C)–1,
an estimated payment amount for taxes
and insurance must be disclosed if the
creditor will establish an escrow

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account for such amounts, even if the
escrow account is not required by the
creditor. The regulation also states that
the creditor must disclose that the
escrow account is required if that is the
case. Under the 2009 Closed-End
Proposal, the statement that an escrow
account is required would have been
implemented in a separate part of the
revised disclosure, outside of the
interest rate and payment summary
table. The inclusion of this requirement
in the September 2010 Interim Rule,
which implemented only the summary
table, was an error. This requirement is
being removed. Some commenters
stated that the text of the regulation as
implemented by the September 2010
Interim Rule could be read to suggest
that the amounts for taxes and insurance
should be disclosed only if the escrow
account was required by the creditor.
The Board’s intent under the September
2010 Interim Rule, however, was to
require disclosure of the estimated
escrow payment if an escrow account
will be established, whether the escrow
account is required or not, as comment
18(s)(3)(i)(C)–1 indicates. Accordingly,
the Board is revising the text of
§ 226.18(s)(3)(i)(C) to clarify the scope of
the disclosure requirement.
The Board also is revising comment
18(s)(3)(i)(C)–1 to clarify how creditors
should estimate the amounts for future
taxes and insurance when such amounts
must be disclosed in connection with
changes in the periodic payment after
consummation. Some commenters
noted that estimating future taxes and
insurance would be highly speculative.
The September 2010 Interim Rule
generally does not require creditors to
make projections about future tax rates
and insurance premiums. Creditors
might be aware, however, of changes in
mortgage insurance premiums that are
based on the outstanding loan balance.
Accordingly, the Board is revising
comment 18(s)(3)(i)(C)–1 to clarify that,
when escrow payments must be
disclosed in multiple columns of the
table, each column should use the same
estimate for taxes and insurance except
that the estimate should reflect changes
in the periodic mortgage insurance
premiums that are known to the creditor
at the time the disclosure is made. The
comment further explains that the
estimated mortgage insurance premiums
should be based on the declining
principal balance that will occur as a
result of changes to the interest rate that
are assumed for purposes of disclosing
those rates under § 226.18(s)(2) and
accompanying commentary.

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18(s)(3)(ii) Interest-Only Payments
Payment date. The Board is revising
§ 226.18(s)(3)(ii)(B) to remove the
requirement to disclose the earliest date
on which the payment disclosed under
that section will be required. Under the
September 2010 Interim Rule, for each
interest rate disclosed, the creditor must
disclose the earliest date that rate may
apply and the corresponding periodic
payment. For an interest-only loan, if
the corresponding payment will be
applied to both accrued interest and
principal, § 226.18(s)(3)(ii)(B) further
requires the creditor to disclose the
earliest date that such payments will be
required. Commenters questioned the
requirement for disclosing two different
dates in the same column and the
potential for confusion. Because interest
is paid in arrears on most mortgage
transactions, those two dates are
generally one month apart; commenters
also noted that the structure of the table
allows for only one date in each
column.
The date in each column is intended
to be the earliest date the interest rate
may apply, not the date that the
corresponding payment will take effect.
Accordingly, the Board is revising
§ 226.18(s)(3)(ii)(B) by removing the
language that requires creditors to
disclose ‘‘the earliest date that such
payments will be required.’’ As revised,
this interim rule clarifies that creditors
should disclose the earliest date that the
interest rate becomes effective rather
than the date that the first payment is
due under the new rate. Revised
§ 226.18(s)(3)(ii)(B) also clarifies that the
itemized amounts disclosed as being
applied to interest and principal when
a consumer begins making principal and
interest payments for an interest-only
loan are those amounts for the first such
payment.
18(s)(7) Definitions
‘‘Negative amortization loans.’’ The
Board is revising § 226.18(s)(7)(v) to
clarify what types of loans are subject to
the special disclosure requirements for
‘‘negative amortization loans.’’ As
adopted by the September 2010 Interim
Rule, § 226.18(s)(7)(v) defines ‘‘negative
amortization’’ as the ‘‘payment of
periodic payments that will result in an
increase in the principal balance under
the terms of the legal obligation.’’ The
rule also defines a ‘‘negative
amortization loan’’ as ‘‘a loan that
permits payments resulting in negative
amortization, other than a reverse
mortgage subject to § 226.33.’’ Thus,
some transactions that do not provide
for multiple payment options, but that
have repayment terms that may result in

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negative amortization, can be construed
as negative amortization loans for
purposes of the interest rate and
payment summary table required by
§ 226.18(s). The special disclosure
requirements for negative amortization
loans and the model clause for such
loans are intended to show consumers
the effects of making minimum
payments that result in negative
amortization in comparison to the
effects of making fully amortizing
payments; the Board did not intend to
apply those requirements to loans that
do not provide for such minimum
payments.
Accordingly, the Board is revising the
definition of ‘‘negative amortization
loan’’ in § 226.18(s)(7) to clarify which
transactions are subject to the disclosure
requirements for such loans in
§ 226.18(s)(2)(ii). Specifically, under the
revised definition the special
disclosures for ‘‘negative amortization
loans’’ would apply only to loan
products that have minimum required
payments that result in negative
amortization. For example, certain loans
that are designed for borrowers with
seasonal income require periodic
amortizing payments but do not require
the borrower to make payments in
certain months; during months when no
payment is made the accrued interest
increases the principal balance. Also,
some adjustable-rate loans provide for
fixed periodic payments that do not
adjust when the interest rate adjusts; in
cases where the interest rate increases
during the loan term, the additional
accrued interest increases the principal
balance. As clarified, the special
disclosure requirements for negative
amortization loans will not apply to
such loans, even though the principal
balance might increase during the loan
term when accrued interest is
capitalized. New comment 18(s)(7)–1
has been added to note that such loans
will be disclosed under the rules for
amortizing loans.
The revised definition will limit the
meaning of ‘‘negative amortization loan’’
to loan products that can be disclosed
meaningfully under the special rules for
negative amortization loans. If a loan
provides for a minimum periodic
payment that causes negative
amortization, creditors must disclose
the corresponding fully amortizing
payment in a parallel row of the table,
as contemplated by §§ 226.18(s)(2)(ii)
and 226.18(s)(4) and Model Clause H–
4(G).
Appendix D—Multiple-Advance
Construction Loans
The Board is adopting a new
comment under Appendix D to clarify

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Federal Register / Vol. 75, No. 249 / Wednesday, December 29, 2010 / Rules and Regulations
the impact of § 226.18(s) on the
appendix’s guidance for disclosing the
‘‘repayment schedule’’ when
construction financing is secured by real
property or a dwelling. A creditor that
also might permanently finance the
construction phase has the option of
disclosing the construction and
permanent phases as separate
transactions or as a single transaction.
See § 226.17(c)(6)(ii). Part I of Appendix
D provides guidance for disclosing the
construction financing as a separate
transaction, while Part II provides
guidance on disclosing the construction
and permanent financing as one
transaction.
For loans secured by real property or
a dwelling, if a creditor elects to
disclose the construction and
permanent phases as separate
transactions, the construction phase
must be disclosed in accordance with
§ 226.18(s), as adopted by the September
2010 Interim Rule and modified by this
interim rule. Under § 226.18(s), the
creditor must disclose the applicable
interest rates and corresponding
periodic payments during the
construction phase in an interest rate
and payment summary table. The
provision in Appendix D, Part I.A.3,
which allows the creditor to omit the
number and amounts of any interest
payments ‘‘in disclosing the payment
schedule under § 226.18(g)’’ does not
apply because the transaction is
governed by § 226.18(s) rather than
§ 226.18(g). Also, because the
construction phase is being disclosed as
a separate transaction and its terms do
not repay all principal, the creditor
must disclose a balloon payment,
pursuant to § 226.18(s)(5). This
guidance is being added to the
commentary as new comment App. D–
6.
On the other hand, if the creditor
elects to disclose the construction and
permanent phases as a single
transaction, the construction phase must
be disclosed pursuant to Appendix D,
Part II.C, which provides that the
creditor shall disclose the repayment
schedule without reflecting the number
or amounts of payments of interest only
that are made during the construction
phase. Appendix D also provides,
however, that creditors must disclose
(outside of the table) the fact that
interest payments must be made and the
timing of such payments. The rate and
payment summary table disclosed under
§ 226.18(s) must reflect only the
permanent phase of the transaction.
Therefore, in determining the rates and
payments that must be disclosed in the
columns of the table, creditors should
apply the requirements of § 226.18(s) to

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the permanent phase only. For example,
under § 226.18(s)(2)(i)(A) or
§ 226.18(s)(2)(i)(B)(1), as applicable, the
creditor should disclose the interest rate
corresponding to the first installment
due under the permanent phase and not
any rate applicable during the
construction phase. This guidance is
also reflected in new comment App. D–
6.
Appendices G and H—Open-End and
Closed-End Model Forms and Clauses
This interim rule amends comment
App. G and H–1 to provide that
creditors may revise the column
heading in Model Clause H–4(H) to
reflect the column heading required by
§ 226.18(s)(2)(i)(C) of the regulation.
Commenters noted a discrepancy
between § 226.18(s)(2)(i)(C) and Model
Clause H–4(H). Section 226.18(s)(2)(i)(C)
states that the column heading must be
labeled as ‘‘first adjustment’’ if the loan
is an adjustable-rate mortgage or,
otherwise, labeled as ‘‘first increase.’’
Due to a technical error, the heading in
Model Clause H–4(H) is incorrectly
labeled ‘‘maximum ever.’’ TILA Section
105(b) provides creditors with a safe
harbor if they use any model form or
clause published by the Board. Thus,
use of Model Clause H–4(H) as
published in the September 2010
Interim Rule is deemed to be in
compliance with § 226.18(s)(2)(i)(C).
Comment App. G and H–1 is being
amended, however, to clarify that the
same safe harbor is available to creditors
that use the model clause but alter the
column heading to read ‘‘first
adjustment’’ or ‘‘first increase,’’ as
applicable, in compliance with the
literal requirement of
§ 226.18(s)(2)(i)(C).
VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C.
3506; 5 CFR Part 1320 Appendix A.1),
the Board reviewed this interim rule
under the authority delegated to the
Board by the Office of Management and
Budget (OMB). The Board also
conducted such a review for the
September 2010 Interim Rule. See 75 FR
58470, 58479–80; Sept. 24, 2010. The
Board believes that the technical
revisions made by this interim rule do
not alter the findings in the Board’s
previous PRA review. The revisions do
not add to the disclosure requirements
adopted in the September 2010 Interim
Rule but, rather, only resolve
uncertainties and clarify under certain
circumstances which of those disclosure
requirements apply to which types of
mortgage loan products and how.
Accordingly, for purposes of this

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interim rule, the Board refers to the
findings of the PRA review set forth in
the September 2010 Interim Rule.
The Board has a continuing interest in
the public’s opinion of the collection of
information. Comments on the
collection of information should be sent
to Cynthia Ayouch, Acting Federal
Reserve Board Clearance Officer,
Division of Research and Statistics, Mail
Stop 95–A, Board of Governors of the
Federal Reserve System, Washington,
DC 20551, with copies of such
comments sent to the Office of
Management and Budget, Paperwork
Reduction Project (7100–0199),
Washington, DC 20503.
VII. Regulatory Flexibility Analysis
In accordance with Section 4 of the
Regulatory Flexibility Act (RFA), 5
U.S.C. 604, the Board published a final
regulatory flexibility analysis for the
amendments to Regulation Z in the
September 2010 Interim Rule. See 75 FR
58470, 58480–82; Sept. 24, 2010. For the
reasons discussed above regarding the
PRA, the Board believes that this
interim rule does not affect the Board’s
prior regulatory flexibility analysis and
that it therefore continues to apply for
purposes of this interim rule. The Board
notes, in fact, that the revisions this
interim rule makes to the provisions of
Regulation Z adopted in the September
2010 Interim Rule are for the purpose of
resolving conflicts and uncertainties,
thus facilitating compliance for
creditors. Consequently, to the extent
this interim rule has any effect on the
Board’s prior regulatory flexibility
analysis, it is to reduce the overall
impact of the September 2010 Interim
Rule on all entities, including small
entities.
List of Subjects in 12 CFR Part 226
Advertising, Consumer protection,
Federal Reserve System, Mortgages,
Reporting and recordkeeping
requirements, Truth in lending.
Authority and Issuance
For the reasons set forth in the
preamble, the Board amends Regulation
Z, 12 CFR part 226, as set forth below:

■

PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
continues to read as follows:

■

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604,
1637(c)(5), and 1639(l); Pub. L. 111–24 § 2,
123 Stat. 1734.

Subpart C—Closed-End Credit
2. Section 226.18 is amended by
revising paragraphs (s)(2)(i)(B)(2),

■

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(s)(3)(i)(C), (s)(3)(ii)(B), and (s)(7)(v) to
read as follows:
§ 226.18

Content of disclosures.

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*

*
*
*
*
(s) * * *
(2) * * *
(i) * * *
(B) * * *
(2) The maximum interest rate that
may apply during the first five years
after the date on which the first regular
periodic payment will be due and the
earliest date on which that rate may
apply, labeled as ‘‘maximum during first
five years’’; and
*
*
*
*
*
(3) * * *
(i) * * *
(C) If an escrow account will be
established, an estimate of the amount
of taxes and insurance, including any
mortgage insurance, payable with each
periodic payment; and
*
*
*
*
*
(ii) * * *
(B) If the payment will be applied to
accrued interest and principal, an
itemization of the amount of the first
such payment applied to accrued
interest and to principal, labeled as
‘‘interest payment’’ and ‘‘principal
payment,’’ respectively;
*
*
*
*
*
(7) * * *
(v) The term ‘‘amortizing loan’’ means
a loan in which payment of the periodic
payments does not result in an increase
in the principal balance under the terms
of the legal obligation; the term
‘‘negative amortization’’ means payment
of periodic payments that will result in
an increase in the principal balance
under the terms of the legal obligation;
the term ‘‘negative amortization loan’’
means a loan, other than a reverse
mortgage subject to § 226.33, that
provides for a minimum periodic
payment that covers only a portion of
the accrued interest, resulting in
negative amortization.
*
*
*
*
*
■ 3. In Supplement I to Part 226:
■ A. Under Section 226.18—Content of
Disclosures, 18(h) Total of payments,
Paragraph 2 is revised.
■ B. Under Section 226.18—Content of
Disclosures, 18(s) Interest rate and
payment summary for mortgage
transactions, Paragraph 1 is revised.
■ C. Under Section 226.18—Content of
Disclosures, 18(s) Interest rate and
payment summary for mortgage
transactions, 18(s)(2) Interest rates,
18(s)(2)(i) Amortizing loans, Paragraph
18(s)(2)(i)(C), paragraph 1 is revised.
■ D. Under Section 226.18—Content of
Disclosures, 18(s) Interest rate and

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payment summary for mortgage
transactions, 18(s)(3) Payments for
amortizing loans, Paragraph
18(s)(3)(i)(C), paragraph 1 is revised.
■ E. Under Section 226.18—Content of
Disclosures, 18(s) Interest rate and
payment summary for mortgage
transactions, new 18(s)(7) Definitions
and paragraph 1 are added.
■ F. Under Appendix D—Multiple
Advance Construction Loans, new
paragraph 6 is added.
■ G. Under Appendices G and H—
Open-End and Closed-End Model Forms
and Clauses, paragraph 1 is revised.
The additions and revisions read as
follows:
Supplement I to Part 226—Official Staff
Interpretations
*

*

*

*

*

Subpart C—Closed-End Credit

*

*

*

*

*

Section 226.18—Content of Disclosures
18(h) Total of payments.

*

*

*

*

*

2. Calculation of total of payments. The
total of payments is the sum of the payments
disclosed under § 226.18(g). For example, if
the creditor disclosed a deferred portion of
the downpayment as part of the payment
schedule, that payment must be reflected in
the total disclosed under this paragraph. To
calculate the total of payments amount for
transactions subject to § 226.18(s), creditors
should use the rules in § 226.18(g) and
associated commentary and, for adjustablerate transactions, comments 17(c)(1)–8 and
–10.

*

*

*

*

*

18(s) Interest rate and payment summary
for mortgage transactions.
1. In general. Section 226.18(s) prescribes
format and content for disclosure of interest
rates and monthly (or other periodic)
payments for mortgage loans. The
information in § 226.18(s)(2)–(4) is required
to be in the form of a table, except as
otherwise provided, with headings and
format substantially similar to Model Clause
H–4(E), H–4(F), H–4(G), or H–4(H) in
Appendix H to this part. A disclosure that
does not include the shading shown in a
model clause but otherwise follows the
model clause’s headings and format is
substantially similar to that model clause.
Where § 226.18(s)(2)–(4) or the applicable
model clause requires that a column or row
of the table be labeled using the word
‘‘monthly’’ but the periodic payments are not
due monthly, the creditor should use the
appropriate term, such as ‘‘bi-weekly’’ or
‘‘quarterly.’’ In all cases, the table should have
no more than five vertical columns
corresponding to applicable interest rates at
various times during the loan’s term;
corresponding payments would be shown in
horizontal rows. Certain loan types and terms
are defined for purposes of § 226.18(s) in
§ 226.18(s)(7).

*

*

*

*

*

Paragraph 18(s)(2)(i)(C)

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1. Payment increases. For some loans, the
payment may increase following
consummation for reasons unrelated to an
interest rate adjustment. For example, an
adjustable-rate mortgage may have an
introductory fixed-rate for the first five years
following consummation and permit the
borrower to make interest-only payments for
the first three years. The disclosure
requirement of § 226.18(s)(2)(i)(C) applies to
all amortizing loans, including interest-only
loans, if the consumer’s payment can
increase in the manner described in
§ 226.18(s)(3)(i)(B), even if it is not the type
of loan covered by § 226.18(s)(3)(i). Thus,
§ 226.18(s)(2)(i)(C) requires that the creditor
disclose the interest rate that corresponds to
the first payment that includes principal as
well as interest, even though the interest rate
will not adjust at that time. In such cases, if
the loan is an interest-only loan, the creditor
also must disclose the corresponding
periodic payment pursuant to
§ 226.18(s)(3)(ii). The table would show, from
left to right: The interest rate and payment at
consummation with the payment itemized to
show that the payment is being applied to
interest only; the interest rate and payment
when the interest-only option ends; the
maximum interest rate and payment during
the first five years; and the maximum
possible interest rate and payment. The
disclosure requirements of § 226.18(s)(2)(i)(C)
do not apply to minor payment variations
resulting solely from the fact that months
have different numbers of days.

*

*

*

*

*

Paragraph 18(s)(3)(i)(C).
1. Taxes and insurance. An estimated
payment amount for taxes and insurance
must be disclosed if the creditor will
establish an escrow account for such
amounts. If the escrow account will include
amounts for items other than taxes and
insurance, such as homeowners association
dues, the creditor may but is not required to
include such items in the estimate. When
such estimated escrow payments must be
disclosed in multiple columns of the table,
such as for adjustable- and step-rate
transactions, each column should use the
same estimate for taxes and insurance except
that the estimate should reflect changes in
periodic mortgage insurance premiums that
are known to the creditor at the time the
disclosure is made. The estimated amounts of
mortgage insurance premiums should be
based on the declining principal balance that
will occur as a result of changes to the
interest rate that are assumed for purposes of
disclosing those rates under § 226.18(s)(2)
and accompanying commentary. The
payment amount must include estimated
amounts for property taxes and premiums for
mortgage-related insurance required by the
creditor, such as insurance against loss of or
damage to property, or against liability
arising out of the ownership or use of the
property, or insurance protecting the creditor
against the consumer’s default or other credit
loss. Premiums for credit insurance, debt
suspension and debt cancellation
agreements, however, should not be
included. Except for periodic mortgage
insurance premiums included in the escrow
payment under § 226.18(s)(3)(i)(C), amounts

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included in the escrow payment disclosure
such as property taxes and homeowner’s
insurance generally are not finance charges
under § 226.4 and, therefore, do not affect
other disclosures, including the finance
charge and annual percentage rate.

*

*

*

*

*

18(s)(7) Definitions.
1. Negative amortization loans. Under
§ 226.18(s)(7)(v), a negative amortization loan
is one that requires only a minimum periodic
payment that covers only a portion of the
accrued interest, resulting in negative
amortization. For such a loan,
§ 226.18(s)(4)(iii) requires creditors to
disclose the fully amortizing periodic
payment for each interest rate disclosed
under § 226.18(s)(2)(ii), in addition to the
minimum periodic payment, regardless of
whether the legal obligation explicitly recites
that the consumer may make the fully
amortizing payment. Some loan types that
result in negative amortization do not meet
the definition of negative amortization loan
for purposes of § 226.18(s). These include, for
example, loans requiring level, amortizing
payments but having a payment schedule
containing gaps during which interest
accrues and is added to the principal balance
before regular, amortizing payments begin (or
resume). For example, ‘‘seasonal income’’
loans may provide for amortizing payments
during nine months of the year and no
payments for the other three months; the
required minimum payments (when made)
are amortizing payments, thus such loans are
not negative amortization loans under
§ 226.18(s)(7)(v). An adjustable-rate loan that
has fixed periodic payments that do not
adjust when the interest rate adjusts also
would not be disclosed as a negative
amortization loan under § 226.18(s). For
example, assume the initial rate is 4%, for
which the fully amortizing payment is $1500.
Under the terms of the legal obligation, the
consumer will make $1500 monthly
payments even if the interest rate increases,
and the additional interest is capitalized. The
possibility (but not certainty) of negative
amortization occurring after consummation
does not make this transaction a negative
amortization loan for purposes of § 226.18(s).
Loans that do not meet the definition of
negative amortization loan, even if they may
have negative amortization, are amortizing
loans and are disclosed under
§§ 226.18(s)(2)(i) and 226.18(s)(3).

*

*

*

*

*

Appendix D—Multiple Advance
Construction Loans

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*

*

*

*

*

6. Relation to § 226.18(s). A creditor must
disclose an interest rate and payment
summary table for transactions secured by
real property or a dwelling, pursuant to
§ 226.18(s), instead of the general payment
schedule required by § 226.18(g).
Accordingly, home construction loans that
are secured by real property or a dwelling are
subject to § 226.18(s) and not § 226.18(g).
Under § 226.176(c)(6)(ii), when a multipleadvance construction loan may be
permanently financed by the same creditor,
the construction phase and the permanent

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phase may be treated as either one
transaction or more than one transaction.
i. If a creditor uses Appendix D and elects
pursuant to § 226.17(c)(6)(ii) to disclose the
construction and permanent phases as
separate transactions, the construction phase
must be disclosed according to the rules in
§ 226.18(s). Under § 226.18(s), the creditor
must disclose the applicable interest rates
and corresponding periodic payments during
the construction phase in an interest rate and
payment summary table. The provision in
Appendix D, Part I.A.3, which allows the
creditor to omit the number and amounts of
any interest payments ‘‘in disclosing the
payment schedule under § 226.18(g)’’ does
not apply because the transaction is governed
by § 226.18(s) rather than § 226.18(g). Also,
because the construction phase is being
disclosed as a separate transaction and its
terms do not repay all principal, the creditor
must disclose a balloon payment, pursuant to
§ 226.18(s)(5).
ii. On the other hand, if the creditor elects
to disclose the construction and permanent
phases as a single transaction, the
construction phase must be disclosed
pursuant to Appendix D, Part II.C, which
provides that the creditor shall disclose the
repayment schedule without reflecting the
number or amounts of payments of interest
only that are made during the construction
phase. Appendix D also provides, however,
that creditors must disclose (outside of the
table) the fact that interest payments must be
made and the timing of such payments. The
rate and payment summary table disclosed
under § 226.18(s) must reflect only the
permanent phase of the transaction.
Therefore, in determining the rates and
payments that must be disclosed in the
columns of the table, creditors should apply
the requirements of § 226.18(s) to the
permanent phase only. For example, under
§ 226.18(s)(2)(i)(A) or § 226.18(s)(2)(i)(B)(1),
as applicable, the creditor should disclose
the interest rate corresponding to the first
installment due under the permanent phase
and not any rate applicable during the
construction phase.

model forms and clauses may not be so
extensive as to affect the substance, clarity,
or meaningful sequence of the forms and
clauses. Creditors making revisions with that
effect will lose their protection from civil
liability. Except as otherwise specifically
required, acceptable changes include, for
example:
i. Using the first person, instead of the
second person, in referring to the borrower.
ii. Using ‘‘borrower’’ and ‘‘creditor’’ instead
of pronouns.
iii. Rearranging the sequences of the
disclosures.
iv. Not using bold type for headings.
v. Incorporating certain state ‘‘plain
English’’ requirements.
vi. Deleting inapplicable disclosures by
whiting out, blocking out, filling in ‘‘N/A’’
(not applicable) or ‘‘0,’’ crossing out, leaving
blanks, checking a box for applicable items,
or circling applicable items. (This should
permit use of multipurpose standard forms.)
vii. Using a vertical, rather than a
horizontal, format for the boxes in the closedend disclosures.

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Amendments to Regulations
Regarding Eligibility for a Medicare
Prescription Drug Subsidy

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Appendices G and H—Open-End and
Closed-End Model Forms and Clauses
1. Permissible changes. Although use of the
model forms and clauses is not required,
creditors using them properly will be deemed
to be in compliance with the regulation with
regard to those disclosures. Creditors may
make certain changes in the format or content
of the forms and clauses and may delete any
disclosures that are inapplicable to a
transaction or a plan without losing the act’s
protection from liability, except formatting
changes may not be made to model forms and
samples in H–18, H–19, H–20, H–21, H–22,
H–23, G–2(A), G–3(A), G–4(A), G–10(A)–(E),
G–17(A)–(D), G–18(A) (except as permitted
pursuant to § 226.7(b)(2)), G–18(B)–(C), G–19,
G–20, and G–21, or to the model clauses in
H–4(E), H–4(F), H–4(G), and H–4(H).
Creditors may modify the heading of the
second column shown in Model Clause H–
4(H) to read ‘‘first adjustment’’ or ‘‘first
increase,’’ as applicable, pursuant to
§ 226.18(s)(2)(i)(C). The rearrangement of the

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By order of the Board of Governors of the
Federal Reserve System, December 21, 2010.
Certain amendments to the Official Staff
Commentary were approved by the Director
of the Division of Consumer and Community
Affairs, acting under authority delegated by
the Board.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2010–32534 Filed 12–28–10; 8:45 am]
BILLING CODE 6210–01–P

SOCIAL SECURITY ADMINISTRATION
20 CFR Part 418
[Docket No. SSA–2010–0033]
RIN 0960–AH24

Social Security Administration.
Interim final rule with request
for comments.

AGENCY:
ACTION:

We are revising our
regulations to incorporate changes to the
Medicare prescription drug coverage
low-income subsidy (Extra Help)
program made by the Affordable Care
Act which was enacted on March 23,
2010. Under our interpretation of
section 3304 of the Affordable Care Act
and this interim final rule, if the death
of a beneficiary’s spouse would decrease
or eliminate the subsidy provided by the
Extra Help program, we will, based on
a determination, or redetermination,
extend the effective period of eligibility
for the most recent determination or
redetermination until 1 year after the

SUMMARY:

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29DER1