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Press Release
August 16, 2010

Federal Reserve issues interim rule revising
disclosure requirements for closed-end
mortgages
For immediate release
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The Federal Reserve Board on Monday issued an interim rule that
revises the disclosure requirements for closed-end mortgage loans
under Regulation Z (Truth in Lending). The interim rule implements
provisions of the Mortgage Disclosure Improvement Act (MDIA) that
require lenders to disclose how borrowers' regular mortgage payments
can change over time.
The MDIA, which amended the Truth in Lending Act, seeks to ensure
that mortgage borrowers are alerted to the risks of payment increases
before they take out mortgage loans with variable rates or payments.
Accordingly, under the interim rule, lenders' cost disclosures must
include a payment summary in the form of a table, stating the following:
The initial interest rate together with the corresponding monthly
payment;
For adjustable-rate or step-rate loans, the maximum interest rate
and payment that can occur during the first five years and a
"worst case" example showing the maximum rate and payment
possible over the life of the loan; and
The fact that consumers might not be able to avoid increased
payments by refinancing their loans.
The interim rule also requires lenders to disclose certain features, such

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as balloon payments, or options to make only minimum payments that
will cause loan amounts to increase. All of the disclosures required in
the interim rule were developed through several rounds of qualitative
consumer testing, including one-on-one interviews with consumers
around the country.
Lenders must comply with the interim rule for applications they receive
on or after January 30, 2011, as specified in the MDIA. Lenders have
the option, however, of providing disclosures that comply with the interim
rule before that date. The Board is also soliciting comment on the interim
rule for 60 days after publication in the Federal Register before
considering the adoption of a permanent rule. The Board's notice is
attached.
Federal Register notice: HTML | 1.2 MB PDF
Comments on this proposal: View | Submit

Last Update: August 16, 2010

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