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Reserve federal bank of DALLAS, TE X A S Dallas 75222 Circular No. 80-185 October 1, 1980 R E G U L A T IO N Z O ffic ia l TO A LL A N D M EM BER C O N C E R N E D ELEVENTH The fo r as paym ent a FE D E R A L F ed e ra l F C -0 1 2 7 re n e g o tia b le e ith e r ra te v a ria b le o b lig a tio n re fin a n c in g under The m a te ria l m o r e ' fu lly p re ta tio n and IN L E N D IN G In te rp re ta tio n m o rtg a g e s 2 2 6 .8 (j). be th e of d ire c te d R e g u la tio n s to The under th e m ade in p u b lic pages in in te rp re ta tio n S e c tio n if Any th e Consum er D e p a rtm e n t, E x t. or re n e w ed , as B o a r d 's a b a llo o n S e c tio n 23, a 1980. p ress re le a s e These c o n c e rn in g A ffa irs d is c lo s u re c o n s titu te s R e g is te r. q u e s tio n s s ta ff d is c lo s u re s is S e p t e m b e r o f th e F ed eral a c tio n . o ffic ia l p e rm its 2 2 6 .8 (b )(8 ), w h ic h , is a c o p y th e an L e n d in g , re g a rd in g fin a l in te rp re ta tio n p u b lic a tio n B o a r d 's T ru th 2 2 6 .8 (b )(3 ) fo llo w in g fo r has - (R R M s ). S e c tio n th e Z o b lig a tio n d a te D IS T R IC T : B o ard S e c tio n on TH E RESERVE R e s e rv e ra te s u b m itte d s h o u ld IN under e x p la in S u p e rv is io n S ta ff o f R e g u la tio n e ffe c tiv e P rin te d and T R U T H BANKS, O TH ERS in te r p r e ta tio n - th e of our pages in te r Bank 6169. S in c e re ly y o u rs , R o b e rt H. B o y k in F ir s t V ic e P r e s id e n t Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) FEDERAL RESERVE press release For im m e d ia te re le a s e The F e d e ra l s ta ff in te rp re ta tio n R e g u la tio n Z - - S e p te m b e r R e serve B o ard c o n c e rn in g T ru th in to d a y m ade d is c lo s u re s L e n d in g - - in th e p u b lic re q u ire d case o f an 18, 1980 o ffic ia l under re n e g o tia b le ra te m o rtg a g e s . The s u b je c t 1981, and s ta ff u n til th e re v is in g R e fo rm o f o f The B o ard a d o p ts R e g u la tio n Act c o n s id e ra tio n in te rp re ta tio n 1980. th a t have by m o rtg a g e lo n g te rm te rm lo a n on th e In such tw o sam e th e T ru th a p ro p o s e d a c re d it not la te r L e n d in g was ru le on th is th a n A p ril 1, S im p lific a tio n a d o p te d fo llo w in g in te rp re ta tio n . co n cern s re n e g o tia b le fe a tu re s : le n d e r 's te rm s B o a r d 's in in te rp re ta tio n e s s e n tia l and be ru le s , th e in te rp re ta tio n m o rtg a g e s a on fo rm a l under The coranen t s ta ff Z w ill a s h o rt o b lig a tio n except fo r a to ra te te rm lo a n ren ew change in th e th e secu red s h o rt in te re s t ra te . as Z i f a o r v a ria b le as a ra te b a llo o n cases a tta c h e d . I t in te rp re ta tio n o b lig a tio n paym ent re n e w e d ,c o n s titu te s The th e a e ffe c tiv e S e c tio n o b lig a tio n (u n d e r d is c lo s u re s 2 2 6 .8 (b )(8 )) S e c tio n o f e ith e r R e g u la tio n 2 2 6 .8 (b )(3 )) w h ic h , re fin a n c in g . in te rp re ta tio n is (u n d e r p e rm its c o n c e rn in g S e p te m b e r # # # # th e s e 23, 1980. # # # # # s u b je c ts , and o th e rs , is FEDERAL RESERVE SYSTEM 12 F in a l AGENCY: B o ard o f A C T IO N : F in a l o ffic ia l SUMMARY: lis h in g T ru th in Because tio n S In in L e n d in g , of th e p e rm its w h ic h , i f ta k in g th is u n iq u e IN L E N D IN G a 12 a fte r F ed e ra l R e s e rv e S y s te m . CFR 2 2 6 .1 (d )( 2 ) ( i i ) , s ta ff in te rp re ta tio n d is c lo s u r e s o f a fo r as a th e B o ard under c o m m e n ts o f ra te ra te § s ta ff th e § Z, (R R M s ). under 2 2 6 .8 (b )(3 ), 2 2 6 .8 ( j ) . re c e iv e d pub in te rp re ta o b lig a tio n under is R e g u la tio n m o rtg a g e s m o rtg a g e s , o b lig a tio n re fin a n c in g re v ie w in g ra te v a ria b le paym ent th e F C -0 1 7 2 re n e g o tia b le re n e g o tia b le (1 ) b a llo o n c o n s titu te s a c tio n In te rp re ta tio n in te rp re ta tio n . e ith e r: as S ta ff th e fe a tu re s (2 ) ren ew ed , TRUTH o ffic ia l re g a rd in g or F C -0 1 7 2 ] o f w ith 226 Z; s ta ff d is c lo s u r e 2 2 6 .8 (b )(8 ); th e fo rm P art [R e g . O ffic ia l G o v e rn o rs acco rd an ce fin a l CFR upon agency is p u b lic a tio n The of in te rp re ta tio n . DATE: E ffe c tiv e S e p te m b e r FOR FURTHER IN F O R M A T IO N o f and Consum er S y s te m , SUPPLEMENTARY The id e n tify in g u n w a rra n te d a v a ila b le fy in g in L e n d in g as v a ria b le te x t p u b lic in fo rm a tio n CFR P a r t 20551 o f d e ta ils in v a s io n fo r 12 D .C . Susan A ffa irs , M. B o ard W e rth a n , o f S ta ff G o v e rn o rs o f A tto rn e y , th e D iv is io n F ed e ra l R eserve (2 0 2 -4 5 2 -3 8 6 7 ). IN F O R M A T IO N : (1 ) w ith 1980. CONTACT: C o m m u n ity W a s h in g to n , 23, o f o ffic ia l d e le te d p erso n al in s p e c tio n fo r th e s ta ff to th e in te rp re ta tio n e x te n t p riv a c y . and p u b lic , re q u ire d The B o ard a c u rre n t c o p y in g F C -0 1 7 2 to is p re v e n t m a in ta in s in d e x p u b lis h e d a and c le a rly m akes p ro v id in g s u b je c t to c e rta in lim ita tio n s v e rs io n o f F C -0 1 7 2 p ro v id e d id e n ti s ta te d in 2 6 1 .6 . (2 ) The June p u rp o ses, ra te 19, 1980, re n e g o tia b le o b lig a tio n s or ra te as m o rtg a g e s b a llo o n c o u ld paym ent be th a t fo r d is c lo s e d o b lig a tio n s th a t T ru th e ith e r are re fin a n c e d . (3 ) be re q u ire d Com m ent in th e T ru th th e Com m ent as w as a ls o re v is e d in an is s u e o f in about w h ic h S im p lific a tio n w h ic h a p p ro ach re v is in g was m e a s u re s o lic ite d re g u la tio n L e n d in g c o n s id e re d in te rim to th e m ust and ta k e R e g u la tio n s o lic ite d u n til Z. th e ty p e be about re v is e d o f d is c lo s u r e a d o p te d by R e fo rm Act in re v is e d th e th e o f ty p e of R e g u la tio n A p ril 1980. th a t 1, Z d is c lo s u r e is s h o u ld 1981, The re g u la tio n be re q u ire d under c o m m e n ts w ill th a t a d o p te d . be th e a d d re s s in g fu lly s h o u ld - 2 - T w e n ty -fo u r th a t a d d re s s e d d e s c r ib e d in th e a llo w in g o n ly a d o p tin g th e o f th e one R e g u la tio n Z ag reed RRMs th e and su res to re v is io n s o f o n ly In tw o (2 ) been (a ) The 3, 1980, a o f was d e c id e d of th e re v is io n (b ) and th e ren ew al ra te th e o f ra te , to re fe r what d e c id in g th e th e tw o tw o o p tio n s T ru th u n til fu n c tio n M any u n iq u e o p tio n s p re fe rre d s h o p p in g o p tio n s . in th e s ta tu s th e in te r p r e ta tio n 's th e (d ) c o m m e n te rs , fe a tu re s in L e n d in g of d is c lo to th e e s p e c ia lly c re d ito rs annual V o lu m e fo r a re 23, secu red c o n s id e ra tio n , The th e expanded Bank tw o by a s h o rt-te rm o f B o ard fo llo w in g in c lu d e fe a tu re s . lo n g -te rm m o rtg a g e ; lo a n and to re g u la tio n s e s s e n tia l on c o m m e n te rs b ro ad e n e d , d is c u s s in g in rig h t p arag rap h o f RRMs, re s c is s io n (a ) re s c is s io n m ade. upon n in e s ta ff re q u ire d th e I t upon p a rtic u la r, m ay c la rifie s th a n has above. depends In re s c is s io n ra th e r be th a t annual th e sam e c re d it u rg ed th a t th e re c o n s id e ra tio n has s ta te d ra te s when been re v is e d in lig h t e x p la in s th a t th e b o th ty p e o f th e s in c e fe e s m ay in s tru be ch arg ed a p p lic a b le . c re d ito rs m ay p e rc e n ta g e in e a rlie r d is c lo s in g h y p o th e tic a ls e d ito ria l new a annual I th e o f not ( i f and w e re Z. re fe r ra te , in le tte rs , th e s im p le to m ade, A ls o , in d ic a te to th e m a k in g con v a ria b le c re d ito rs lim its in te re s t re fle c te d in th e te x t by several c a lc u la tio n s in th e p e rc e n ta g e ra te ta b le s is paym ent fro m c iv il lo a n o f w e ll it o f a was e x a m p le ; lia b ilit y w ith i f is on ra te ra te a re change ta b le s changes been in used fin a l le tte r , i t V o lu m e re g a rd to I m ay is th e re fle c t a p p e a rs about be used th e ra th e r d e te rm in e re s u lt re fle c t to fo rm . c a lc u la to r, to to m ade c o m m e n te rs A d iffe r e n t as have th e th e e x a m p le s . ta b le s , used, as changes th a t ra is e d b a llo o n th e re a c h ed , c o rre c tly , accu racy of ra te . O ffic ia l 1980. d a te th e p ro te c te d changes R e g u la tio n p o in t ra te p e rc e n ta g e (6 ) S e p te m b e r been Loan c o n ta in in g th e be has Home Some fu rth e r p o s itio n . in te rp re ta tio n : lo a n re n e w ra te . d is c lo s u r e A lth o u g h c la rify B o a r d 's I f F e d e ra l upon so. re v is e d p e rc e n ta g e th e th e and in te rim c a lc u la tio n s ). M in o r o f (5 ) n ec e s s a ry th e best m o rtg a g e s to in th e in o f s h o rt-te rm in te re s t s ta tin g re c e iv e d th e in te rp re ta tio n to used th e tw o c o m m e n te rs c o m m e n te rs a llo w in g o f be th e As when to in te rp re ta tio n P arag rap h and th a n th e th e th a t p e rm ittin g th e p arag rap h a re APRs. o f o f p e rm ittin g th e d e s c r ip tio n c o mme n t s a ll a change do d is c lo s u re s . p e rm itte d a ls o (1 ) c e rta in in te re s t annual m a jo rity of a s s e rte d te x t by d e s c r ib e d o f in o f th e ty p e (c ) tra c t T h ree th e o b lig a tio n The a p p lic a b ility scope a to th e to but fo r of a p p e a rs m ade a re : it at by p ro p o s a l's The fa v o re d in s te a d They th w a rte d co vered le n d e r 's except a p p lic a b ility m ent d is c lo s u re , d iffic u ltie s lig h t have fe a tu re s te rm s , be th e o p tio n s m o rtg a g e s A p ril and o f re s u ltin g (4 ) These w o u ld is s u e in te rp re ta tio n . re g u la tio n . w ith re c e iv e d . m ake. p e rm ittin g not ty p e w ere d is c lo s u re p ro p o sed re v is e d h o w e v e r, c o m m e n ts in te rim s ta ff in te rp re ta tio n F C -0 1 7 2 , as re v is e d , is e ffe c tiv e -3- (7) §§ 2 2 6 .8 (b )(3 ) e ith e r te rm as of su res § Authority: and - on I f m o rtg a g e s , paym ent in it ia l based 2 2 6 .8 ( j ) 2 2 6 .8 (b )(8 ) b a llo o n th e 15 U.S.C. 1640(f). th e lo a n , te rm R e n e g o tia b le or o f re n e g o tia b le re fin a n c in g - m o rtg a g e s as th e ra te w ith ra te a ll v a ria b le ra te u n d e rly in g m o rtg a g e s d is c lo s u re s m ay m o rtg a g e s be based w ith d is c lo s e d on th e a ll d is c lo as b a llo o n paym ent each re n e w al o f m o rtg a g e . a re m ust m o rtg a g e s d is c lo s u re s be d is c lo s e d g iv e n at th e lo a n . § 2 2 6 .9 (g ) - The m o rtg a g e i f § i f rig h t d is c lo s u re 2 2 6 .9 0 3 - i f no a d d re s s e s (1 ) a Z a change in th e to in re n e w a lo a n m o rtg a g e ren ew th a t ty p e o f th e of th e th e m o re fiv e equal Bank m e n ts under § In p ro p e r ra te may sam e and a p p ly m o rtg a g e B o ard ) T h is under le tte r c h a ra c te ris tic s : a le n d e r 's te rm s , is a m o rt d is c lo s u r e s (2 ) c re d it of paym ent (R R M s ). e s s e n tia l th e re g u la tio n s The m ust g ra n t U n le s s in te re s t ra te a v e ra g e p o in t one (5% ) im p le m e n t th e Bank le n d e r n a tio n a l of th e y e a rs , o b lig a te d H o w ever, in fiv e in te rv a ls . except RRM th a t fo r d e s c r ib e d becam e to o f in te re s t p e rc e n ta g e change over in te re s t th e re n e w th e lo a n , ra te m ay lif e o f d ecreases, pays At w ith ra te not (0 .5 % ) re g u la tio n s a o ff o p tio n th e th e tim e th e change in c r e a s e th e lo n g -te rm an in d e x , per i t by b o rro w e r lo a n . m o rtg a g e th e ra te th e b o rro w e r th e p o in t B o a r d 's secu red y e a r, not lo a n o f at re n e w a l, in ra te as c o m p u te d o r d ecrease w ith m o rtg a g e . need to a m a x im u m A lth o u g h pass a lo n g b o rro w e r. le tte r ra is e s m o rtg a g e s th e under § is s u e o f w h e th e r 2 2 6 .8 (b )(8 ) or RRMs as s h o u ld m o rtg a g e s be tre a te d as w ith b a llo o n pay 2 2 6 .8 (b )(3 ). th e a b le ra te ra te m o rtg a g e s , over th e s ta f f 's tra n s a c tio n s lo n g e x te n d e d . to th e th e but re n e w al is tw o of d e s c r ib e d th re e m o n th ly m ust ra te (B a n k th e b a llo o n m o rtg a g e ; th e ty p e a d ju s t th e Your v a ria b le B o ard o f y e a rs . o n e -h a lf to th is on to a re g a rd in g c o n ta in in g lo a n re n e g o tia b le as in s tru m e n ts lo n g -te rm is p e rc e n ta g e le n d e r o f a p p ly c re d it le tte r a m o rtg a g e , m o rtg a g e . not new le n d e r B o ard. th a n in c re a s e s te rra at to a tra n s a c tio n lo a n m ay no to ra te d is c lo s e d m o rtg a g e s h o rt-te rm a 30 tie d by fo r by Bank does your a p p ly 1980. to le n d e r to not v a ria b le paym ent was and ra te e x a m p le up th e by th e is s u e d th a t in s tru m e n ts Loan 3, tim e , b e in g Home a re s c is s io n secu red One does as b a llo o n ch arg ed th e A p ril The is a re s p o n se lo a n ra te . on o f m o rtg a g e F e d e ra l e ffe c tiv e as made m o rtg a g e a re in is re n e g o tia b le s h o rt-te rm o b lig a tio n rig h t is fo r o n ly re s c is s io n m ade ra te fe e s T h is R e g u la tio n is The re n e g o tia b le gage o f d is c lo s u re RRMs te rm of v ie w , and are th e RRMs c o n ta in s h o rt-te rm s u b je c t to m o rtg a g e . fe a tu re s b a llo o n changes In th e in paym ent th e RRM, of b o th lo a n s . annual th e lo n g -te rm L ik e p e rc e n ta g e le n d e r m ust v a ri v a ria b le ra te ren ew each s h o rt-te rm lo a n te rm be c o u ld ra th e r th a n th e On s in c e th e each end o p tio n th e o f to lo a n sh o rt th e a th a t te rm . a S in c e a i t as am ount is in te re s t th e lo a n an C a lc u la tio n s c h e d u le v a ria b le th is o f $ 1 ,2 6 4 , ra te is w ith th e on an ra te over to s ta te th e am ount o f th e paym ent am ount ra te o f one N o te th a t th e a q u a rte r o ffic ia l in annual lif e te rm s o f as a p e rc e n ta g e has at th e a ren ew al of a re n e w al con d is c lo s u r e s § ra te and d is c lo s u r e fo r a n o th e r b a llo o n is 2 2 6 .8 (b )(8 ); i f th e an o f th e paym ent p e rm is s ib le o r (2 ) re n e w ed , at th a t in d e x as a c o n s titu te s change ra te . The e q u a ls lo a n m o rtg a g e . 2 p ercen t o f in it ia l te rm a re c a lc u la te d v a ria b le ra te m o rtg a g e , th e n th a t ch arg e, and e ffe c t. 360 lo a n . paym ent T h e re fo re , m o n th ly p a y m e n ts th e ra te w ill Bank B o ard Bank B o a r d 's ra te be o f m o n th ly in c re a s e s in c re a s e s S e c tio n o f fiv e (0 .2 5 % ) th e w o u ld p e rm its u s in g ra te in te re s t ra te , ta b le s of e ffe c t annual have to based to th a n re q u ire s in c re a s in g c re d ito rs ta b le s , ra th e r a ls o by e s tim a te d in n a tio n a l tie d , o n e -h a lf 2 2 6 .8 (b )(8 ) th e a re p e rc e n ta g e im p le m e n te d in c re a s e by made th e m a x im u m p e rc e n ta g e be p e rc e n ta g e under w h ic h F C -0 1 5 2 annual w h ic h th e a d is c lo s u re s th e RRMs a d d itio n , p ay m e n ts in it ia l under fo r w o u ld p o in t th e in as a d d itio n a l to w ith o f 1 5 .3 2 % . o f im m e d ia te in th e m o rtg a g e s 3 0 -y e a r fin a n c e in te re s t ra te p e rc e n ta g e a show n fa c t m o rtg a g e . on a ra te be o f The In ra te e x a m p le . charg e th e as th e ra te in c re a s e s annual v a ria b le w ith to ta l w o u ld in te rp re ta tio n e ffe c t fo r c o n d itio n s on p a y m e n t. th a n te rm e x a m p le , th e as c o n s u m m a tio n ra te , per y e a r, ra te one s ta ff ra th e r of w ay, m o rtg a g e s paym ent yea rs . at re q u ire s h y p o th e tic a l e s tim a te d ra te s , new paym ent b a llo o n accept fo llo w in g tre a te d te rm , lim ita tio n m o n th ly o f to w h ic h , fin a n c e id e n tific a tio n in d e x th a t is o n ly fe a tu re . (0 .5 % ) th e le n d e r e x a m p le ra te th e 30 p e rc e n ta g e in c lu d e s th e o f s c h e d u le th is p o in t th e 3 0 -y e a r As o f in te re s t a in it ia l p e rc e n ta g e paym ent RRMs p a y m e n ts m o rtg a g e and p e rc e n ta g e c a lc u la te of in c re a s e d is c lo s u re th e m o rtg a g e , c u s to m e r th is tim e under th e p re p a id p e rio d d is c lo s e d . and (5 % ) th e be m o rtg a g e a th e v a ria b le th is o f assum e M o n th ly 2 2 6 .8 (b )(8 ) one p o in ts and annual to b o th at d is c lo s u r e d is c lo s u re s v a ria b le m ust re g u la tio n s , ave ra g e 15% th e o f S 2 2 6 .8 (b )(3 ), th re e -y e a r annual based s u b je c t in c re a s e a ty p e S e c tio n re g a rd in g th e a m o rtiz a tio n e x a m p le , or v ie w e d set o b lig a tio n under ($ 2 ,0 0 0 ). re c e iv e s a re in ra te of th a t m o rtg a g e s , fo r th e b a llo o n w ith te rm , le n d e r W hen T h e re fo re , ra te 2 2 6 .8 (j). paym ent o f as y e a rs , lo a n b a la n c e . v a ria b le lo a n . v ie w e d e n tire fe a tu re s th is c u s to m e r an th e lo a n . v ie w is be fiv e a n o th e r s ta ff's § paym ent ra te . re q u irin g o ff lo n g -te rm each c o n ta in ra te assum ed to o f w ith in te re s t o b lig a tio n am ount end pay a c o u ld th re e th e to of b a llo o n RRMs lo a n illu s tra te I f th e At a o f paym ent $ 1 0 0 ,0 0 0 The on hand, te rm th e under b a llo o n o f fa ils th a t th e a paym ent To as a be RRMs is re fin a n c in g and te rm re fin a n c in g (1 ) to d iffe r e n t b a llo o n m o rtg a g e s , e ith e r: c u s to m e r o th e r has re fin a n c e s h o rt-te rm b a llo o n th e lo a n a t s titu te s i f c o n s id e re d be th e d is c lo s e d . th a t on s ta te a on p e rc e n ta g e s im p le th e change in - 5 - I f p ro v id e s v a ria b le th a t re fin a n c in g s , su res at an 2 2 6 .8 (b )(3 ), d iffe r th e fro m te rm each set a and RRM o f th e o f th e m ay be In th e lo a n s ta te th a t th e re m e n t" o f o f g iv e n each based a re th e be i f not th re e new a re S 2 2 6 .8 (b )(8 ) not tre a te d as in L e n d in g d is c lo T ru th The p a id d is c lo s u re s In th e e x a m p le ra th e r paym ent a As be g iv e n 30 w o u ld be th a t P u b lic a and new la b e lle d th e as b a llo o n In fo rm a tio n d is c lo s u r e as above, y e a rs , re q u irin g d is c lo s u re re q u ire w o u ld g iv e n th a n re fin a n c in g due. not c o u ld th e fin a l w ith when does a under o f y e a rs , c o n s id e re d th is s h o rt-te rm ra te in it ia l e x a m p le lo a n v a ria b le b e fo re ra te th e a c u la rly in lig h t On o f th e o f a d d itio n a l d e ta ile d th e T ru th in in it ia l th e re of be paym ent tim e g iv e n when be hand, a th e te rm s in fo rm a tio n so m ay th e paym ent A lth o u g h paym ent M o reo v e r, d is c lo s u r e s fo rth . s e rv e c u s to m e r a The pay a d v a n ta g e s th e and at th e and ra te i t tim e A t pay th e w o u ld be th e e ffe c t re a s o n th e o f th e of a ra te m a k in g in fa c t ra te , p a r ti lo a n . w o u ld a ls o not in c re a s e s a t re q u ire d be p ro v id e re c e iv e th e to tim e s ta te re fin a n c e d re n e w a l, a c tu a l changes d is c lo s u re s fu n c tio n , RRM a n d o f w o u ld each new o f fo r RRM m a y each c o u ld o f tre a tin g h y p o th e tic a l an be in 2 2 6 .8 (b )(8 ) c o n s u m m a tio n p o s s ib le w o u ld th a t s h o p p in g th e a t c u s to m e r re fle c tin g o ff § A n o th e r th e th e d is c lo s in g Under re n e w le n d e r in a d v a n ta g e s d is c lo s u r e s fu rn is h in g u s e fu l can about th e " b a llo o n 1 5 .8 4 % . a d ju s tm e n ts th e one on w o u ld d is c lo s u r e s u n d e rta k in g to based lo a n o th e r th e p e rio d ic in fo rm a tio n and be in fo rm e d o f be ra te . fe a tu re , p erso n b a llo o n b a llo o n and o b lig a tio n c o n s u m m a tio n , te rm . and a $ 1 ,2 6 4 o b lig a te d . w ith w o u ld in it ia l re fin a n c in g be id e a becom es c u s to m e rs . c o m p le te th e y th a t ra te th e w o u ld m o rtg a g e s . som e le n d e r 's o f ra te c e rta in v a ria b le L e n d in g in it ia l a m o u n t, fa c t to a re th e th a t fo r in te re s t w o u ld th e 35 new c u s to m e r o b lig a tio n lo a n 's w o u ld th e paym ent is d is c lo s u re s m o rtg a g e s , c u s to m e r o th e r in fo rm a tio n of new th e re ra te c u s to m e r 3 0 -y e a r set th e a d is c lo s u r e s as w o u ld about th e p a y m e n ts , and v ie w , b a llo o n of d is c lo s u re s p e rc e n ta g e e n tire te rm v a ria b le th e i t u s e fu l annual an new g iv e a ll m o n th ly p ro v is io n , w o u ld in c re a s e above, s ta ff's as v a ria b le 36 The th e th e m th e RRM s, paym ent m o rtg a g e m o rtg a g e s . be T h e re fo re , re n e w a l, on In a fo r ra te g iv e n c o n te n t 2 2 6 .8 (b )(3 ), a lth o u g h $ 1 0 0 ,6 1 3 . lo n g -te rm th a t be b a llo o n th e ra te 2 2 6 .8 (b )(3 ) e x a m p le as end § te rm . RR M s of g iv e n S 2 2 6 .6 (c ). th re e -y e a r v ie w not a and w o u ld § re fin a n c e d re fin a n c in g , th e a re p e rc e n ta g e S 2 2 6 .8 ( j ) . under s ta te s , as w o u ld under o f tim e v a ria b le lo a n p ay m e n t" 1200 under need tim in g tra n s a c tio n L e tte r th e annual tre a te d th e fo r d is c lo s u r e s " b a llo o n paym ent th e c u s to m e r is b o th th a t re n e w al o f th e d is c lo s u re s in re n e w a l. I f $ ra te in c re a s e s th e in a t at th e c u s to m e r ra te , re n e w a l, w o u ld a ls o e m p h a s iz e re fin a n c e w ith a n o th e r le n d e r. The s e p a ra te For te rm e x a m p le , o f s ta ff o p tio n s . th e p e rc e n ta g e w is h e s L en ders le n d e rs lo a n ra te d is c lo s u re s ). (a s based m ay in on to p o in t m ay not out m ix d is c lo s e b a llo o n th e not a paym ent lo n g te rm th a t th e s e th is tw o paym ent le tte r ty p e s s c h e d u le d is c lo s u re s ), o f th e m o rtg a g e g iv e s o f le n d e rs p e rm itte d based but (a s on th e c a lc u la te in tw o d is c lo s u re . an v a ria b le s h o rt annual ra te -6 - The ty p e o f e ith e r RRM d w e llin g o f in v o lv e d a p p ro a c h , re s c is s io n not a p p lic a tio n is th e § in v o lv e d . ra te a ris e . not I f b a llo o n re fin a n c in g s , and re s c is s io n a p p lie s . is re fin a n c e d w ith o f th e b a la n c e to re s c is s io n . be e x te n d e d , no fe e s a re fe a tu re s at o f d is c lo s u r e e ffe c tiv e la tio n Z § th is b o th has le tte r , u n til w ill 1980, V I T itle and M o n e ta ry th e act was to th e 1980. C o n tro l c lo s e d on is p u b lic a tio n fa c ts o f and J u ly an fo r o f or a d o p te d d e v e lo p m e n t be A p ril 1, act 9 6 -2 2 1 , p ro p o se d on 31, and s ta ff is s u e s be does th e rig h t o b lig a tio n in excess is s u b je c t c re d it re s c in d a b le . not m ay I f a p p ly . RRM p r o g r a m s , re c o g n iz e d th e s ta ff in an is d is c lo s u r e c o n s id e re d th a t RRMs m o rtg a g e s and th e M ay under s ig n e d o f 1980 now c o n ta in th a t th e each and T ru th la w w ill re v is e d in on FR Z th e S w ill becom e im p le m e n ts The com m ent c o m m e n ts . R e g u la tio n w ith 31, D e re g u la tio n th a t 2 9 7 0 2 ). be Regu L e n d in g M arch In s titu tio n s re v ie w in g o f th a t th e R e g u la tio n (4 5 in te rp re ta tio n above in in to D e p o s ito ry 5, is p o s itio n re s o lv e d 1981, was acco rd an ce d is c u s s e d in te rim re v is io n com m ent com m ent an ch arg e 2 2 6 .8 ( j ) paym ent fin a lly fo r o ffic ia l o f and is re p re s e n ts That Law A i t b a llo o n can by A c t. A c t. w o u ld w h e th e r a d d itio n a l w o u ld a c o n s titu te e x te n d e d fin a n c e o f a d ju s tm e n ts re s c is s io n w h ere re n e w a l, th e a d v a n ta g e s . is s u e s P u b lic c re d it new upon o f d e te rm in e s u n p a id w hat Under fro m fo llo w e d , re n e w a ls o n ly upon a c q u is itio n rig h t th a t, 2 2 6 .8 (b )(3 ) and th e th e is used, 2 2 6 .9 0 3 and a d d itio n , ra te and re s c is s io n th e SS h o w e v e r, th e ap p ro a c h a re depend fo llo w e d . tra n s a c tio n fin a n c e re fin a n c in g th a t is p ro v id e s fe e s th e im p e d e In R e fo rm p u b lis h e d T h is a fte r be le n d e r, a c c ru ed charges c e rta in o n ly and p e rio d tim e . T h is th a t to § 2 2 6 .9 0 3 a p p e a rs v a ria b le schem e d is c lo s u r e s th e 2 2 6 .8 (b )(8 ) S im p lific a tio n as i t in it ia l ra te w ill a p p ro a c h to re fin a n c in g s , p o rtio n not th e v a ria b le o rig in a l le n d e r re s c is s io n lie n In te rp re ta tio n p lu s th a t o rd er e ith e r a c c e p ta b le a o f d is c lo s u r e f ir s t S e c tio n th e ch arg ed , In under I f th e paym ent B o ard rig h t e x e m p ts a c o n s titu te o f and s in c e I f do u n p a id th e w h ic h 2 2 6 .9 (g )(1 ) re q u ire m e n ts is o f and 2 2 6 .1 (d )(2 ). Z, is s u e d I t is e ffe c tiv e on S e p te m b e r 17, lim ite d S e p te m b e r S in c e re ly , Janet H a rt D ire c to r B o ard o f G o v e rn o rs o f th e F e d e ra l R e s e rv e S y s te m , (s ig n e d ) T h e o d o re E. 1980. A llis o n [S E A L ] T h e o d o re S e c re ta ry E. o f A llis o n th e B o ard 23,
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