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F e d e r a l R es e r v e Ba n k o f D a lla s DALLAS. TEXAS 75222 C i r c u l a r No. 75-43 Ma rch 26, 1975 FEDERAL TRUTH-IN-LENDING STATEMENT TO ALL BANKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: T h e Board of G o v e rn o rs of the Federal R e s e rv e System has is su e d for comment a F ederal T r u t h - i n - L e n d i n g Sta te ment to a s s i s t homeb u y e r s in u n d e r s t a n d i n g the te rm s of t h e i r m o rtg a g e . T h i s form would be combined with forms th at h a v e b e e n p ro p o s e d by the D epartm ent of Housing a nd U rban Developm ent to implement the d i s c l o s u r e r e q u ir e m e n ts of the Real Estate Settlement P r o c e d u r e s Act of 1974. T h e B o a r d 's p r e s s re le a s e a nd Federal R e g i s te r docum ent a r e p r in t e d on th e r e v e r s e of this c i r c u l a r a n d the following p a g e s . Any com ments sh o u ld be submitted in w riti n g to the Office of th e S e c r e t a r y , Board of G o v e rn o rs of the Federal R e s e r v e System , Washington, D . C . 20551, by A pril 16, 1975. Sincerely y o u rs , T . W. P la n t F i r s t Vice P r e s i d e n t This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) k m FEDERAL press RESERVE release r ftt& r . For immediate release March 18, 1975 The Board of Governors of the Federal Reserve System today published for comment a disclosure form, under the Truth in Lending Act, to assist homebuyers in understanding the terms of their mortgage. The proposed new form will be used, along with forms already published for comment by the Housing and Urban Development Department, to implement the disclosure of settlement and credit cost requirements of the Real Estate Settlement Procedures Act of 1974. The forms, as finally adopted, are to be given to homebuyers in advance of and at the time of settlement in credit transactions under the Real Estate Settlement Procedures Act. This Act requires in part that homebuyers be supplied with all information required to be disclosed by the Truth in Lending Act. The Federal Reserve Board is the rulemaking body under the Truth in Lending Act, and has therefore prepared the Truth in Lending portion of the Uniform Disclosure/Settlement Statement required by the new legislation. The proposed new Truth in Lending form is accompanied by proposed instructions for its use. Comment will be received in writing by the Secretary of the Board through April 16. A copy of the Board's proposal is attached. # # # CHAPTER II--FEDERAL RESERVE SYSTEM SUBCHAPTER A--BO ARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [24 C .F . R PART 82] REAL ESTATE SETTLEMENT PROCEDURES N otice of Proposed Rule Making The Real E state Settlem ent P roced ures Act of 1974 (P. L. 93-533) requires the d isclo su re of settlem ent and credit c o sts on standardized form s to be given to home buyers in advance of and at the tim e of settlem ent in a transaction which involves a federally related m ortgage loan. Section 4 of this statute (12 U .S .C . § 2603) sp ecifica lly requires that such form s include all information and data required to be d isclo se d by the F ederal Truth in Lending Act. The Secretary of Housing and Urban Development on Febru ary 18, 1975, published for com m ent the settlem ent cost portions of these form s and referenced the fact that the Board would subsequently be publishing the Truth in Lending portion of the Uniform D isclosu re/S ettlem en t Statement. Pursuant to the authority under P . L. 93-533, the concurrence of the S ecre tary of Housing and Urban Development, and the Board's authority under the Truth in Lending Act (15 U .S .C . § 1604), the following form is published for comment. This form is proposed to be added as the la s t page of the combined form dealing with both settlem ent and cred it c o sts in federally related m ortgage loans, which was proposed by HUD on February 18, 1975. It is anticipated that following the an alysis of resp onsive com m ents, the Board w ill recom m end to the S ecretary of Housing and Urban Development the format of the Truth in Lending form to be included in the combined form . It is a lso anticipated that the Secretary of Housing and Urban Development w ill subsequently incorporate th ese Truth in Lending -2- d isclo su res into a finally adopted combined Uniform D isclosu re/S ettlem en t Statement. FEDERAL TRUTH-IN-LENDING STATEMENT (As part of Uniform D isclosu re/S ettlem en t Form) ♦Indicates a rate or amount that is estim ated and may change at tim e of closing. 1. a. The principal amount of the loan is $______ b. Plus other amounts financed: 1. P roperty insurance prem ium s $ 2. 3. c. Total amount borrowed d. L e ss any Prepaid Finance Charges: 1. 2. 3. 4. 5. 6. 2. $ Origination fee or points paid by borrower Loan discount or points paid by s e lle r if passed on to buyer Interest from to Mortgage guaranty insurance e. Amount Financed a. The FINANCE CHARGE co n sists of: 1. 2. 3. $ $ S $ $ $ . ___ . $ Interest (sim ple annual rate o f ___ Total prepaid finance charges (Id) 3■ 4. $" $“ -- ------------------------ ' %) $ $" $" $" b. Total FINANCE CHARGE $___________ a. The ANNUAL PERCENTAGE RATE on the amount financed is b. If the contract includes a provision for variation in the in terest rate, describ e__ ___ % -3- 4. The borrower w ill pay principal and in terest in (number) eoual fmonthlv a n a r t e r l£ instalm ents of $____________ each and a final gTyment Sf f ■ The total of payments is Jj>” , .. f i r s t p a y m e n t w i l l be due on and the f in a l p a y m e n t o n ________ 5. and The finance charge begins to accrue on (date) charges oT ^ ”* 7. °* ° r delinquency, the creditor m ay a s s e s s a. Conditions and penalties for prepaying this loan: b. Identification of method of rebate of unearned finance charges: ge insurance with extended coverage in the amount of m ay be Durrha"oLr^ Ulre^ in connection with the loan. This insurance for reasonable ra rc®J a»y company, subject to rejection by the lender e s ^ a t e d cost o f T ’ ‘ PUrcha8ed throu *or a term of ________ years. 9. The secu rity for this loan shall be p r o v id e d ^ ^ t h ^ T lu t h i^aTl8a<itl0n Ai8 subj ect to the riSht of r e sc issio n as r e s c is s io n m ust be glvon l o ^ W ^ e ^ T " * 4* n0tifiCa,i0n °* rigW The undersiened R ecelPt of t h i s / _ / advance or /../settlem en t D isclosure: rrow er(s) acknowledge receip t of the above d isclosu re. Date B uyer/B orrow er Date B u y e r/ B o rro w e r Date Seller T JaT e Lender -4Instructions for F ed eral Truth in Lending Statement The above form is the F ederal Truth in Lending disclosu re portion of the Uniform D isclosu re/S ettlem en t and Truth in Lending Statement to be provided by the Department of Housing and Urban Development in connection with the Real Estate Settlem ent P rocedures Act (P .L . 93-533). This form is not intended to be totally com prehensive of all charges and term s that m ay be incident to a given F ederally related m ortgage loan. Blank lin es have been inserted in sev era l instances where it is anticipated that additional charges or term s may be included by the creditor. In the event that additional charges or information may not be fully accom modated in th ese blank lin es, a creditor may include such information or charges on the r ev e rse side of this form , provided that the form is clea rly m arked at the bottom: "See r ev e rse side for important information. " In the event that item s listed on the proposed form are not applicable to a given transaction, these lin es may be m arked with the abbreviation "N/An for not applicable. As indicated, the creditors may make bona fide estim a tes in connection with charges on which exact dollar amounts or rates are unknown at the tim e of the d isclo su re (§ 226.6(f)). Such estim ates m ust be replaced with exact information, if known, at settlem ent. Item 1 Item 1(a) is provided to show the principal amount of the loan. Note: A ll sectional r eferen ces in the instructions are to Regulation Z issu ed by the Board of Governors of the F ed eral R eserve System . -5 - Item 1(b). Property insurance prem ium s under 1(b) are in cluded in the amount financed if they are financed a s part of the credit transaction and the other conditions of § 226.4(a)(6) have been m et (See item 8). The blank lin es 2 and 3 are intended to include sim ilar item s, which are financed, such a s those under the term s of § 226.4(b) or (e). Item 1(c). This item is the sum of 1(a) and 1(b). Item 1(d). This item is intended for d isclosu re of all prepaid finance ch arg es, (§ 226.4(a), § 226.8(d)(2) and § 226.8(e)(1)). Line 1 is provided to show the origination fee or points paid directly by the borrow er, such as the one point perm itted in VA tran s actions . Line 2 is provided to show those loan discounts or points paid by the s e lle r when passed on to the borrower either directly or in directly through the sellin g p rice (§ 226.406). Line 3 is provided to show the prepayment of any accruing in terest charge on the contract until the first monthly payment is due. The blank spaces are provided to show the dates for which such in te r e st a ccru es. Line 4 is provided to show the payment of m ortgage guaranty insurance prem ium s, such a s FHA and MGIC, accruing prior to the fir st monthly payment. The blank lines 5 and 6 a re provided to ahow any additional prepaid finance charges. Item 1(e). This item is provided to show the difference between item 1(c) and 1(d) (§ 226. 8(d)(7)/226. 8 (d )(l)). -6- Item 2 This item is provided to show the components of the finance charge, such as the amount of contract in terest, all prepaid finance ch arges, continuing prem ium s for m ortgage guaranty insurance, and discounts to cash custom ers as w ell as to show the total amount of the finance charge (§ 226.4(a)). Line 1 p erm its,at the creditor's option, the d isclosu re of the contract rate of in terest where such in terest is computed by the application of a sim ple annual rate. None of these d isclo su res are required of the creditor in a fir st purchase money m ortgage transaction (§ 226.8(d)(3)). Item 3 Item 3(a) is provided to show the annual percentage rate as determ ined in accordance with § 226. 5(b). Item 3(b) is provided to U show variable in terest provisions (§ 226.8(b)(8)). Item 4 This item term s. provides for the d isclosu re of the repayment The total of payments is an optional d isclosu re in purchase money first m ortgage transactions (§ 226.8(b)(3)). The blank line following the end of item 4 is provided to show any required infor m ation or d isclosu re with resp ect to balloon payments or other payment irreg u la rities. Item 5 This item is provided to show the date on which the finance charge begins to accrue if that date differs from the date shown at the top of the form (§ 226.8(b)(1)). 1 / Item 3(b) is included to accom m odate the proposed amendment " § 226.8(b)(8). -7 - Item 6 This item is provided for the d isclosu re of any late payment, delinquency or reinstatem ent charges (§ 226. 4(c) and § 226.8(b)(4)). Item 7 Item 7(a) is provided for d isclo su re of conditions or penal ties charged in the event of prepayment of a loan on which in terest is computed on the unpaid principal balance (§ 226.8(b)(6)). Item 7 (b )is provided to identify the method of rebate of unearned finance charges in the event of prepayment in £ull of instalm ent obligations which include precomputed finance charges (§ 226.8(b)(7)). Item 8 This item is provided to show property damage insurance required as an incident to the credit transaction (§ 226.4(a)(6)). Prem ium s for such insurance when purchased from the creditor may be excluded from the finance charge when this d isclosu re is m ade, including the d isclosu re of the cu stom er's option. Item 9 This item is provided to show the creditor's secu rity in terests (§ 226. 2(z) and § 226.8(b)(5)). Item 10 This item is included to reference d isclosu re of the right of r e s c is s io n in transactions to which this right relates (§ 226.9). The right of r e sc issio n does not apply to the creation, retention or assum ption of a first lien or equivalent secu rity in terest to finance the acquisition of a dwelling in which the custom er r esid es or expects to resid e (§ 226.9(g)(1)). -8- It e m 11 This item provides for an optional acknowledgment of the disclosu re statem ent and differentiates between the form given in advance of settlem ent and the form given on the day of settlem ent. This notice is published pursuant to Section 553(b) of Title 5 United States Code, and § 262. 2(a) of the Rules of Procedure of the Board of Governors of the F ederal R eserve System (12 C. F . R. 262. 2(a)). To aid in the consideration of these m atters by the Board, interested persons are invited to submit relevant data, view s, or arguments in writing to the Office of the Secretary, the Board of Governors of the F ed eral R eserve System , Washington, D. C. , 20551, to be received not later than April 16, 1975. Such m aterial w ill be made available upon request, except as provided in 12 C. F. R. § 261. 6(a) of the Board's Rules Regarding Availability of Information. By order of the Board of G overnors, March 17, 1975. Griffith L. Garwood A ssistan t Secretary of the Board [SEAL]
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