1. Disclosures given as applicable. The disclosures required under
this section need be made only as applicable. Thus, for example, if
negative amortization cannot occur in a home-equity plan, a reference
to it need not be made.
2. Duty to respond to requests for information. If the consumer,
prior to the opening of a plan, requests information as suggested
in the disclosures (such as the current index value or margin), the
creditor must provide this information as soon as reasonably possible
after the request.
5b(d)(1)
Retention of Information 1. When disclosure not required. The creditor
need not disclose that the consumer should make or otherwise retain
a copy of the disclosures if they are retainable—for example, if the
disclosures are not part of an application that must be returned to
the creditor to apply for the plan.
6-1166.28
5b(d)(2) Conditions for Disclosed Terms Paragraph 5b(d)(2)(i) 1. Guaranteed
terms. The requirement that the creditor disclose the time by
which an application must be submitted to obtain the disclosed terms
does not require the creditor to guarantee any terms. If a creditor
chooses not to guarantee any terms, it must disclose that all of the
terms are subject to change prior to opening the plan. The creditor
also is permitted to guarantee some terms and not others, but must
indicate which terms are subject to change.
2. Date for obtaining disclosed terms. The
creditor may disclose either a specific date or a time period for
obtaining the disclosed terms. If the creditor discloses a time period,
the consumer must be able to determine from the disclosure the specific
date by which an application must be submitted to obtain any guaranteed
terms. For example, the disclosure might read, “To obtain the following
terms, you must submit your application within 60 days after the date
appearing on this disclosure,” provided the disclosure form also shows
the date.
Paragraph 5b(d)(2)(ii) 1. Relation
to other provisions. Creditors should consult the rules in section
226.5b(g) regarding refund of fees.
6-1166.29
5b(d)(4) Possible Actions by Creditor Paragraph 5b(d)(4)(i) 1. Fees imposed
upon termination. This disclosure applies only to fees (such
as penalty or prepayment fees) that the creditor imposes if it terminates
the plan prior to normal expiration. The disclosure does not apply
to fees that are imposed either when the plan expires in accordance
with the agreement or if the consumer terminates the plan prior to
its scheduled maturity. In addition, the disclosure does
not apply to fees associated with collection of the debt, such as
attorneys’ fees and court costs, or to increases in the annual percentage
rate linked to the consumer’s failure to make payments. The actual
amount of the fee need not be disclosed.
2. Changes specified in the initial agreement. If changes may occur pursuant to section 226.5b(f)(3)(i), a creditor
must state that certain changes will be implemented as specified in
the initial agreement.
Paragraph
5b(d)(4)(iii) 1. Disclosure of conditions. In making this
disclosure, the creditor may provide a highlighted copy of the document
that contains such information, such as the contract or security agreement.
The relevant items must be distinguished from the other information
contained in the document. For example, the creditor may provide a
cover sheet that specifically points out which contract provisions
contain the information, or may mark the relevant items on the document
itself. As an alternative to disclosing the conditions in this manner,
the creditor may simply describe the conditions using the language
in section 226.5b(f)(2)(i)-(iii), 226.5b(f)(3)(i) (regarding freezing
the line when the maximum annual percentage rate is reached), and
226.5b (f)(3)(vi) or language that is substantially similar. The condition
contained in section 226.5b(f)(2)(iv) need not be stated. In describing
specified changes that may be implemented during the plan, the creditor
may provide a disclosure such as: “Our agreement permits us to make
certain changes to the terms of the line at specified time or upon
the occurrence of specified events.”
2. Form of disclosure. The list of conditions
under section 226.5b(d)(4)(iii) may appear with the segregated disclosures
or apart from them. If the creditor elects to provide the list of
conditions with the segregated disclosures, the list need not comply
with the precedence rule in section 226.5b(a)(2).
6-1166.3
5b(d)(5) Payment Terms Paragraph 5b(d)(5)(i) 1. Length of the plan. The
combined length of the draw period and any repayment period need not
be stated. If the length of the repayment phase cannot be determined
because, for example, it depends on the balance outstanding at the
beginning of the repayment period, the creditor must state that the
length is determined by the size of the balance. If the length of
the plan is indefinite (for example, because there is no time limit
on the period during which the consumer can take advances), the creditor
must state that fact.
2. Renewal provisions. If, under the credit agreement, a creditor
retains the right to review a line at the end of the specified draw
period and determine whether to renew or extend the draw period of
the plan, the possibility of renewal or extension—regardless of its
likelihood—should be ignored for purposes of the disclosures. For
example, if an agreement provides that the draw period is five years and that the
creditor may renew the draw period for an additional five years, the
possibility of renewal should be ignored and the draw period should
be considered five years. (See the commentary accompanying section
226.9(c)(1) dealing with change in terms requirements.)
6-1166.31
Paragraph 5b(d)(5)(ii) 1. Determination of the minimum
periodic payment. This disclosure must reflect how the minimum
periodic payment is determined, but need only describe the principal
and interest components of the payment. Other charges that may be
part of the payment (as well as the balance-computation method) may,
but need not, be described under this provision.
2. Fixed-rate and term-payment options
during draw period. If the home-equity plan permits the consumer
to repay all or part of the balance during the draw period at a fixed
rate (rather than a variable rate) and over a specified time period,
this feature must be disclosed. To illustrate, a variable-rate plan
may permit a consumer to elect during a ten-year draw period to repay
all or a portion of the balance over a three-year period at a fixed
rate. The creditor must disclose the rules relating to this feature
including the period during which the option can be selected, the
length of time over which repayment can occur, any fees imposed for
such a feature, and the specific rate or a description of the index
and margin that will apply upon exercise of this choice. For example,
the index and margin disclosure might state, “If you choose to convert
any portion of your balance to a fixed rate, the rate will be the
highest prime rate published in the Wall Street Journal that
is in effect at the date of conversion plus a margin.” If the fixed
rate is to be determined according to an index, it must be one that
is outside the creditor’s control and is publicly available in accordance
with section 226.5b(f)(1). The effect of exercising the option should
not be reflected elsewhere in the disclosures, such as in the historical
example required in section 226.5b(d)(12)(xi).
3. Balloon payments. In programs where
the occurrence of a balloon payment is possible, the creditor must
disclose the possibility of a balloon payment even if such a payment
is uncertain or unlikely. In such cases, the disclosure might read,
“Your minimum payments may not be sufficient to fully repay the principal
that is outstanding on your line. If they are not, you will be required
to pay the entire outstanding balance in a single payment.” In programs
where a balloon payment will occur, such as programs with interest-only
payments during the draw period and no repayment period, the disclosures
must state that fact. For example, the disclosure might read, “Your
minimum payments will not repay the principal that is outstanding
on your line. You will be required to pay the entire outstanding balance
in a single payment.” In making this disclosure, the creditor is not
required to use the term “balloon payment.” The creditor also is not
required to disclose the amount of the balloon payment. (See, however,
the requirement under section 226.5b(d)(5)(iii).) The balloon-payment
disclosure does not apply in cases where repayment of the entire outstanding
balance would occur only as a result of termination and acceleration.
The creditor also need not make a disclosure about balloon payments
if the final payment could not be more than twice the amount of other
minimum payments under the plan.
6-1166.32
Paragraph 5b(d)(5)(iii) 1. Minimum-periodic-payment
example. In disclosing the payment example, the creditor may
assume that the credit limit as well as the outstanding balance is
$10,000 if such an assumption is relevant to calculating payments.
(If the creditor only offers lines of credit for less than $10,000,
the creditor may assume an outstanding balance of $5,000 instead of
$10,000 in making this disclosure.) The example should reflect the
payment comprised only of principal and interest. Creditors may provide
an additional example reflecting other charges that may be included
in the payment, such as credit-insurance premiums. Creditors may assume
that all months have an equal number of days, that payments are collected
in whole cents, and that payments will fall on a business day even
though they may be due on a non-business day. For variable-rate plans,
the example must be based on the last rate in the historical example
required in section 226.5b(d)(12)(xi), or a more recent rate. In cases
where the last rate shown in the historical example is different from
the index value and margin (for example, due to a rate cap), creditors
should calculate the rate by using the index value and margin. A discounted
rate may not be considered a more recent rate in calculating this
payment example for either variable- or fixed-rate plans.
2. Representative examples. In plans with multiple payment options within the draw period or
within any repayment period, the creditor may provide representative
examples as an alternative to providing examples for each payment
option. The creditor may elect to provide representative payment examples
based on three categories of payment options. The first category consists
of plans that permit minimum payment of only accrued finance charges
(“interest-only” plans). The second category includes plans in which
a fixed percentage or a fixed fraction of the outstanding balance
or credit limit (for example, 2 percent of the balance or 1/180th
of the balance) is used to determine the minimum payment. The third
category includes all other types of minimum-payment options, such
as a specified dollar amount plus any accrued finance charges. Creditors
may classify their minimum-payment arrangements within one of these
three categories even if other features exist, such as varying lengths
of a draw or repayment period, required payment of pastdue amounts,
late charges, and minimum dollar amounts. The creditor may use a single
example within each category to represent the payment options in that
category. For example, if a creditor permits minimum payments of 1
percent, 2 percent, 3 percent or 4 percent of the outstanding balance,
it may pick one of these four options and provide the example required
under section 226.5b(d)(5)(iii) for that option alone. The example
used to represent a category must be an option commonly chosen by
consumers, or a typical or representative example. (See the commentary
to section 226.5b(d)(12)(x) and (xi) for a discussion of the use of
representative examples for making those disclosures. Creditors using
a representative example within each category must use the same example
for purposes of the disclosures under section 226.5b(d)(5)(iii) and
226.5b(d)(12)(x) and (xi).) Creditors may use representative examples
under section 226.5b(d)(5) only with respect to the payment example
required under paragraph (d)(5)(iii). Creditors must provide a full
narrative description of all payment options under section 226.5b(d)(5)(i)
and (ii).
3. Examples
for draw and repayment periods. Separate examples must be given
for the draw and repayment periods unless the payments are determined
the same way during both periods. In setting forth payment examples
for any repayment period under this section (and the historical example
under section 226.5b(d)(12)(xi)), creditors should assume a $10,000
advance is taken at the beginning of the draw period and is reduced
according to the terms of the plan. Creditors should not assume an
additional advance is taken at any time, including at the beginning
of any repayment period.
6-1166.33
4. Reverse mortgages. Reverse mortgages, also
know as reverse-annuity or home-equity-conversion mortgages, in addition
to permitting the consumer to obtain advances, may involve the disbursement
of monthly advances to the consumer for a fixed period or until the
occurrence of an event such as the consumer’s death. Repayment of
the reverse mortgage (generally a single payment of principal and
accrued interest) may be required to be made at the end of the disbursements
or, for example, upon the death of the consumer. In disclosing these
plans, creditors must apply the following rules, as applicable:
- If the reverse mortgage has a specified period for
advances and disbursements but repayment is due only upon occurrence
of a future event
such as the death of the consumer, the creditor must assume that disbursements
will be made until they are scheduled to end. The creditor must assume
repayment will occur when disbursements end (or within a period following
the final disbursement which is not longer than the regular interval
between disbursements). This assumption should be used even though
repayment may occur before or after the disbursements are scheduled
to end. In such cases, the creditor may include a statement such as
“The disclosures assume that you will repay the line at the time the
draw period and our payments to you end. As provided in your agreement,
your repayment may be required at a different time.” The single payment
should be considered the “minimum periodic payment” and consequently
would not be treated as a balloon payment. The example of the minimum
payment under section 226.5b(d)(5)(iii) should assume a single $10,000
draw.
- If the reverse mortgage has neither a specified period
for advances or disbursements nor a specified repayment date and these
terms will be determined solely by reference to future events, including
the consumer’s death, the creditor may assume that the draws and disbursements
will end upon the consumer’s death (estimated by using actuarial tables,
for example) and that repayment will be required at the same time
(or within a period following the date of the final disbursement which
is not longer than the regular interval for disbursements). Alternatively,
the creditor may base the disclosures upon another future event it
estimates will be most likely to occur first. (If terms will be determined
by reference to future events which do not include the consumer’s
death, the creditor must base the disclosures upon the occurrence
of the event estimated to be most likely to occur first.)
- In making the disclosures, the creditor must assume
that all draws and disbursements and accrued interest will be paid
by the consumer. For example, if the note has a nonrecourse provision
providing that the consumer is not obligated for an amount greater
than the value of the house, the creditor must nonetheless assume
that the full amount to be drawn or disbursed will be repaid. In this
case, however, the creditor may include a statement such as “The disclosures
assume full repayment of the amount advanced plus accrued interest,
although the amount you may be required to pay is limited by your
agreement.”
- Some reverse mortgages provide that some or all of
the appreciation in the value of the property will be shared between
the consumer and the creditor. The creditor must disclose the appreciation
feature, including describing how the creditor’s share will be determined,
any limitations, and when the feature may be exercised.
6-1166.34
5b(d)(6) Annual Percentage Rate 1. Preferred-rate
plans. If a creditor offers a preferential fixed-rate plan in
which the rate will increase a specified amount upon the occurrence
of a specified event, the creditor must disclose the specific amount
the rate will increase.
6-1166.35
5b(d)(7) Fees Imposed by Creditor 1. Applicability. The fees referred to in section 226.5b(d)(7) include items such
as application fees, points, annual fees, transaction fees, fees to
obtain checks to access the plan, and fees imposed for converting
to a repayment phase that is provided for in the original agreement.
This disclosure includes any fees that are imposed by the creditor
to use or maintain the plan, whether the fees are kept by the creditor
or a third party. For example, if a creditor requires an annual credit
report on the consumer and requires the consumer to pay this fee to
the creditor or directly to the third party, the fee must be specifically
stated. Third-party fees to open the plan that are initially paid
by the consumer to the creditor may be included in this disclosure
or in the disclosure under section 226.5b(d)(8).
2. Manner
of describing fees. Charges may be stated as an estimated dollar
amount for each fee, or as a percentage of a typical or representative
amount of credit. The creditor may provide a stepped fee schedule
in which a fee will increase a specified amount at a specified date.
(See the discussion contained in the commentary to section 226.5b(f)(3)(i).)
3. Fees not required to
be disclosed. Fees that are not imposed to open, use, or maintain
a plan, such as fees for researching an account, photocopying, paying
late, stopping payment, having a check returned, exceeding the credit
limit, or closing out an account do not have to be disclosed under
this section. Credit report and appraisal fees imposed to investigate
whether a condition permitting a freeze continues to exist—as discussed
in the commentary to section 226.5b(f)(3)(vi)—are not required to
be disclosed under this section or section 226.5b(d)(8).
4. Rebates of closing costs. If closing costs are imposed they must be disclosed, regardless
of whether such costs may be rebated later (for example, rebated to
the extent of any interest paid during the first year of the plan).
5. Terms used in disclosure. Creditors need not use the terms “finance charge” or “other charge”
in describing the fees imposed by the creditor under this section
or those imposed by third parties under section 226.5b(d)(8).
6-1166.36
5b(d)(8) Fees Imposed by Third Parties to
Open a Plan 1. Applicability. Section 226.5b(d)(8) applies only to fees imposed
by third parties to open the plan. Thus, for example, this section
does not require disclosure of a fee imposed by a government agency
at the end of a plan to release a security interest. Fees to be disclosed
include appraisal, credit report, government agency, and attorneys’
fees. In cases where property insurance is required by the creditor,
the creditor either may disclose the amount of the premium or may
state that property insurance is required. For example, the disclosure
might state, “You must carry insurance on the property that secures
this plan.”
2. Itemization
of third-party fees. In all cases creditors must state the total
of third-party fees as a single dollar amount or a range except that
the total need not include costs for property insurance if the creditor
discloses that such insurance is required. A creditor has two options
with regard to providing the more detailed information about third-party
fees. Creditors may provide a statement that the consumer may request
more specific cost information about third-party fees from the creditor.
As an alternative to including this statement, creditors may provide
an itemization of such fees (by type and amount) with the early disclosures.
Any itemization provided upon the consumer’s request need not include
a disclosure about property insurance.
3. Manner of describing fees. A good faith
estimate of the amount of fees must be provided. Creditors may provide,
based on a typical or representative amount of credit, a range for
such fees or state the dollar amount of such fees. Fees may be expressed
on a unit-cost basis, for example, $5 per $1,000 of credit.
4. Rebates of third-party fees. Even if fees imposed by third parties may be rebated, they must
be disclosed. (See the commentary to section 226.5b(d)(7).)
6-1166.37
5b(d)(9) Negative Amortization 1. Disclosure required. In transactions where the minimum payment will not or may not be
sufficient to cover the interest that accrues on the outstanding balance,
the creditor must disclose that negative amortization will or may
occur. This disclosure is required whether or not the unpaid interest
is added to the outstanding balance upon which interest is computed.
A disclosure is not required merely because a loan calls for nonamortizing
or partially amortizing payments.
5b(d)(10) Transaction Requirements 1. Applicability. A limitation on
automated teller machine usage need not be disclosed under this paragraph unless that
is the only means by which the consumer can obtain funds.
6-1166.38
5b(d)(12) Disclosures for Variable-Rate
Plans 1. Variable-rate provisions. Sample forms in appendix G-14 provide
illustrative guidance on the variable-rate rules.
Paragraph 5b(d)(12)(iv) 1. Determination of annual
percentage rate. If the creditor adjusts its index through the
addition of a margin, the disclosure might read, “Your annual percentage
rate is based on the index plus a margin.” The creditor is not required
to disclose a specific value for the margin.
Paragraph 5b(d)(12)(viii) 1. Preferred-rate provisions. This paragraph requires disclosure of preferred-rate provisions,
where the rate will increase upon the occurrence of some event, such
as the borrower-employee leaving the creditor’s employ or the consumer
closing an existing deposit account with the creditor.
2. Provisions on conversion
to fixed rates. The commentary to section 226.5b(d)(5)(ii) discusses
the disclosure requirements for options permitting the consumer to
convert from a variable rate to a fixed rate.
6-1166.39
Paragraph 5b(d)(12)(ix) 1. Periodic limitations on increases
in rates. The creditor must disclose any annual limitations on
increases in the annual percentage rate. If the creditor bases its
rate limitation on 12 monthly billing cycles, such a limitation should
be treated as an annual cap. Rate limitations imposed on less than
an annual basis must be stated in terms of a specific amount of time.
For example, if the creditor imposes rate limitations on only a semiannual
basis, this must be expressed as a rate limitation for a six-month
time period. If the creditor does not impose periodic limitations
(annual or shorter) on rate increases, the fact that there are no
annual rate limitations must be stated.
2. Maximum limitations on increases in rates. The maximum annual percentage rate that may be imposed under each
payment option over the term of the plan (including the draw period
and any repayment period provided for in the initial agreement) must
be provided. The creditor may disclose this rate as a specific number
(for example, 18 percent) or as a specific amount above the initial
rate. For example, this disclosure might read, “The maximum annual
percentage rate that can apply to your line will be 5 percentage points
above your initial rate.” If the creditor states the maximum rate
as a specific amount above the initial rate, the creditor must include
a statement that the consumer should inquire about the rate limitations
that are currently available. If an initial discount is not taken
into account in applying maximum rate limitations, that fact must
be disclosed. If separate overall limitations apply to rate increases
resulting from events such as the exercise of a fixed-rate conversion
option or leaving the creditor’s employ, those limitations also must
be stated. Limitations do not include legal limits in the nature of
usury or rate ceilings under state or federal statutes or regulations.
3. Form of disclosures. The creditor need not disclose each periodic or maximum rate limitation
that is currently available. Instead, the creditor may disclose the
range of the lowest and highest periodic and maximum rate limitations
that may be applicable to the creditor’s home-equity plans. Creditors
using this alternative must include a statement that the consumer
should inquire about the rate limitations that are currently available.
6-1166.41
Paragraph 5b(d)(12)(x) 1. Maximum-rate-payment
example. In calculating the payment creditors should assume the
maximum rate is in effect. Any discounted or premium initial rates
or periodic rate limitations should be ignored for purposes of this
disclosure. If a range is used to disclose the maximum cap under section 226.5b(d)
(12)(ix), the highest rate in the range must be used for the disclosure
under this paragraph. As an alternative to making disclosures based
on each payment option, the creditor may choose a representative example
within the three categories of payment options upon which to base
this disclosure. (See the commentary to section 226.5b(d)(5).) However,
separate examples must be provided for the draw period and for any
repayment period unless the payment is determined the same way in
both periods. Creditors should calculate the example for the repayment
period based on an assumed $10,000 balance. (See the commentary to
section 226.5b(d)(5) for a discussion of the circumstances in which
a creditor may use a lower outstanding balance.)
2. Time the maximum rate could be reached. In stating the date or time when the maximum rate could be reached,
creditors should assume the rate increases as rapidly as possible
under the plan. In calculating the date or time, creditors should
factor in any discounted or premium initial rates and periodic-rate
limitations. This disclosure must be provided for the draw phase and
any repayment phase. Creditors should assume the index and margin
shown in the last year of the historical example (or a more recent
rate) is in effect at the beginning of each phase.
6-1166.42
Paragraph 5b(d)(12)(xi) 1. Index movement. Index
values and annual percentage rates must be shown for the entire 15
years of the historical example and must be based on the most recent
15 years. The example must be updated annually to reflect the most
recent 15 years of index values as soon as reasonably possible after
the new index value becomes available. If the values for an index
have not been available for 15 years, a creditor need only go back
as far as the values have been available and may start the historical
example at the year for which values are first available.
2. Selection of index values. The historical example must reflect the method of choosing index
values for the plan. For example, if an average of index values is
used in the plan, averages must be used in the example, but if an
index value as of a particular date is used, a single index value
must be shown. The creditor is required to assume one date (or one
period, if an average is used) within a year on which to base the
history of index values. The creditor may choose to use index values
as of any date or period as long as the index value as of this date
or period is used for each year in the example. Only one index value
per year need be shown, even if the plan provides for adjustments
to the annual percentage rate or payment more than once in a year.
In such cases, the creditor can assume that the index rate remained
constant for the full year for the purpose of calculating the annual
percentage rate and payment.
6-1166.43
3. Selection of margin. A value for the margin
must be assumed in order to prepare the example. A creditor may select
a representative margin that it has used with the index during the
six months preceding preparation of the disclosures and state that
the margin is one that it has used recently. The margin selected may
be used until the creditor annually updates the disclosure form to
reflect the most recent 15 years of index values.
4. Amount of discount or premium. In
reflecting any discounted or premium initial rate, the creditor may
select a discount or premium that it has used during the six months
preceding preparation of the disclosures, and should disclose that
the discount or premium is one that the creditor has used recently.
The discount or premium should be reflected in the example for as
long as it is in effect. The creditor may assume that a discount or
premium that would have been in effect for any part of a year was
in effect for the full year for purposes of reflecting it in the historical
example.
5. Rate limitations. Limitations on both periodic and maximum rates must be reflected
in the historical example. If ranges of rate limitations are provided
under section 226.5b (d)(12)(ix), the highest rates provided in those ranges must be used
in the example. Rate limitations that may apply more often than annually
should be treated as if they were annual limitations. For example,
if a creditor imposes a 1 percent cap every six months, this should
be reflected in the example as if it were a 2 percent annual cap.
6-1166.44
6. Assumed advances. The creditor should assume that the $10,000 balance is an advance
taken at the beginning of the first billing cycle and is reduced according
to the terms of the plan, and that the consumer takes no subsequent
draws. As discussed in the commentary to section 226.5b(d)(5), creditors
should not assume an additional advance is taken at the beginning
of any repayment period. If applicable, the creditor may assume the
$10,000 is both the advance and the credit limit. (See the commentary
to section 226.5b(d)(5) for a discussion of the circumstances in which
a creditor may use a lower outstanding balance.)
7. Representative payment options. The creditor need not provide an historical example for all of its
various payment options, but may select a representative payment option
within each of the three categories of payments upon which to base
its disclosure. (See the commentary to section 226.5b(d)(5).)
8. Payment information. The payment figures in the historical example must reflect all significant
program terms. For example, features such as rate and payment caps,
a discounted initial rate, negative amortization, and rate carryover
must be taken into account in calculating the payment figures if these
would have applied to the plan. The historical example should include
payments for as much of the length of the plan as would occur during
a 15-year period. For example:
- If the draw period is 10 years and the repayment
period is 15 years, the example should illustrate the entire 10-year
draw period and the first 5 years of the repayment period.
- If the length of the draw period is 15 years and there
is a 15-year repayment phase, the historical example must reflect
the payments for the 15-year draw period and would not show any of
the repayment period. No additional historical example would be required
to reflect payments for the repayment period.
- If the length of the plan is less than 15 years, payments
in the historical example need only be shown for the number of years
in the term. In such cases, however, the creditor must show the index
values, margin and annual percentage rates and continue to reflect
all significant plan terms such as rate limitations for the entire
15 years.
A creditor need show only a single payment per year in
the example, even though payments may vary during a year. The calculations
should be based on the actual payment-computation formula, although
the creditor may assume that all months have an equal number of days.
The creditor may assume that payments are made on the last day of
the billing cycle, the billing date or the payment-due date, but must
be consistent in the manner in which the period used to illustrate
payment information is selected. Information about balloon payments
and remaining balance may, but need not, be reflected in the example.
6-1166.45
9. Disclosures for repayment
period. The historical example must reflect all features of the
repayment period, including the appropriate index values, margin,
rate limitations, length of the repayment period, and payments. For
example, if different indices are used during the draw and repayment
periods, the index values for that portion of the 15 years that reflect
the repayment period must be the values for the appropriate index.
10. Reverse mortgages. The historical example for reverse mortgages should reflect 15 years
of index values and annual percentage rates, but the payment column
should be blank until the year that the single payment will be made,
assuming that payment is estimated to occur within 15 years. (See
the commentary to section 226.5b(d)(5) for a discussion of reverse
mortgages.)
