The requirements of this section
apply to open-end credit plans secured by the consumer’s dwelling.
For purposes of this section, an annual percentage rate is the annual
percentage rate corresponding to the periodic rate as determined under
section 226.14(b).
(b)
Time of disclosures. The disclosures and brochure required by paragraphs (d) and (e)
of this section shall be provided at the time an application is provided
to the consumer.
10a(c)
Duties of third parties. Persons
other than the creditor who provide applications to consumers for
home-equity plans must provide the brochure required under paragraph
(e) of this section at the time an application is provided. If such
persons have the disclosures required under paragraph (d) of this
section for a creditor’s home-equity plan, they also shall provide
the disclosures at such time.
10a(1) Retention of information. A statement that the consumer should
make or otherwise retain a copy of the disclosures.
(2) Conditions
for disclosed terms.
(i) A statement of the time by which
the consumer must submit an application to obtain specific terms disclosed
and an identification of any disclosed term that is subject to change
prior to opening the plan.
(ii) A statement that, if a disclosed
term changes (other than a change due to fluctuations in the index
in a variable-rate plan) prior to opening the plan and the consumer
therefore elects not to open the plan, the consumer may receive a
refund of all fees paid in connection with the application.
6-668.3
(3) Security interest and risk to home. A statement that the creditor
will acquire a security interest in the consumer’s dwelling and that
loss of the dwelling may occur in the event of default.
(4) Possible actions by creditor.
(i) A statement that, under
certain conditions, the creditor may terminate the plan and require
payment of the outstanding balance in full in a single payment and
impose fees upon termination; prohibit additional extensions of credit
or reduce the credit limit; and, as specified in the initial agreement,
implement certain changes in the plan.
(ii) A statement that the consumer may
receive, upon request, information about the conditions under which
such actions may occur.
(iii) In lieu of the disclosure required
under paragraph (d)(4)(ii) of this section, a statement of such conditions.
6-668.4
(5) Payment terms. The payment terms of the plan, including—
(i) The length of the draw period and any repayment period.
(ii) An explanation of
how the minimum periodic payment will be determined and the timing
of the payments. If paying only the minimum periodic payments may
not repay any of the principal or may repay less than the outstanding
balance, a statement of this fact, as well as
a statement that a balloon payment
may result.
10b(iii) An example, based on a $10,000 outstanding balance and a recent
annual percentage rate,
10c showing the minimum
periodic payment, any balloon payment, and the time it would take
to repay the $10,000 outstanding balance if the consumer made only
those payments and obtained no additional extensions of credit.
If different payment terms may apply to the draw and any
repayment period, or if different payment terms may apply within either
period, the disclosures shall reflect the different payment terms.
6-668.5
(6)
Annual percentage rate. For fixed-rate plans, a recent annual
percentage rate
10c imposed under the plan and a statement that the rate does
not include costs other than interest.
(7) Fees imposed
by creditor. An itemization of any fees imposed by the creditor
to open, use, or maintain the plan, stated as a dollar amount or percentage,
and when such fees are payable.
(8) Fees imposed
by third parties to open a plan. A good faith estimate, stated
as a single dollar amount or range, of any fees that may be imposed
by persons other than the creditor to open the plan, as well as a
statement that the consumer may receive, upon request, a good faith
itemization of such fees. In lieu of the statement, the itemization
of such fees may be provided.
6-668.6
(9) Negative
amortization. A statement that negative amortization may occur
and that negative amortization increases the principal balance and
reduces the consumer’s equity in the dwelling.
(10) Transaction
requirements. Any limitations on the number of extensions of
credit and the amount of credit that may be obtained during any time
period, as well as any minimum outstanding balance and minimum draw
requirements, stated as dollar amounts or percentages.
(11) Tax implications. A statement that the consumer should consult
a tax advisor regarding the deductibility of interest and charges
under the plan.
6-668.7
(12) Disclosures for variable-rate plans. For
a plan in which the annual percentage rate is variable, the following
disclosures, as applicable:
(i) The fact that the annual percentage
rate, payment, or term may change due to the variable-rate feature.
(ii) A statement that
the annual percentage rate does not include costs other than interest.
(iii) The index used
in making rate adjustments and a source of information about the index.
(iv) An explanation
of how the annual percentage rate will be determined, including an
explanation of how the index is adjusted, such as by the addition
of a margin.
(v)
A statement that the consumer should ask about the current index value,
margin, discount or premium, and annual percentage rate.
(vi) A statement that the
initial annual percentage rate is not based on the index and margin
used to make later rate adjustments, and the period of time such initial
rate will be in effect.
6-668.8
(vii) The frequency of changes in the
annual percentage rate.
(viii) Any rules relating to changes
in the index value and the annual percentage rate and resulting changes
in the payment amount, including, for example, an explanation of
payment limitations and rate carryover.
(ix) A statement of any annual or more
frequent periodic limitations on changes in the annual percentage
rate (or a statement that no annual limitation exists), as well as
a statement of the maximum annual percentage rate that may be imposed
under each payment option.
(x) The minimum periodic payment required
when the maximum annual percentage rate for each payment option is
in effect for a $10,000 outstanding balance, and a statement of the
earliest date or time the maximum rate may be imposed.
6-668.9
(xi) An historical example, based on
a $10,000 extension of credit, illustrating how annual percentage
rates and payments would have been affected by index-value changes
implemented according to the terms of the plan. The historical example
shall be based on the most recent 15 years of index values (selected
for the same time period each year) and shall reflect all significant
plan terms, such as negative amortization, rate carryover, rate discounts,
and rate and payment limitations, that would have been affected by
the index movement during the period.
(xii) A statement that rate information
will be provided on or with each periodic statement.
(1) change the annual percentage rate unless—
(i) such change is based on an index that is not under the creditor’s
control; and
(ii)
such index is available to the general public;
(2) terminate a plan and demand
repayment of the entire outstanding balance in advance of the original
term (except for reverse-mortgage transactions that are subject to
paragraph (f)(4) of this section) unless—
(i) there is fraud or
material misrepresentation by the consumer in connection with the
plan;
(ii) the consumer
fails to meet the repayment terms of the agreement for any outstanding
balance;
(iii) any
action or inaction by the consumer adversely affects the creditor’s
security for the plan, or any right of the creditor in such security;
or
(iv) federal
law dealing with credit extended by a depository institution to its
executive officers specifically requires that as a condition of the
plan the credit shall become due and payable on demand, provided that
the creditor includes such a provision in the initial agreement.
6-669.1
(3) change any term, except
that a creditor may—
(i) provide in the initial agreement
that it may prohibit additional extensions of credit or reduce the
credit limit during any period in which the maximum annual percentage
rate is reached. A creditor also may provide in the initial agreement
that specified changes will occur if a specified event takes place
(for example, that the annual percentage rate will increase a specified
amount if the consumer leaves the creditor’s employment).
(ii) change the index and
margin used under the plan if the original index is no longer available,
the new index has an historical movement substantially similar to
that of the original index, and the new index and margin would have
resulted in an annual percentage rate substantially similar to the
rate in effect at the time the original index became unavailable.
(iii) make a specified
change if the consumer specifically agrees to it in writing at that
time.
(iv) make
a change that will unequivocally benefit the consumer throughout the
remainder of the plan.
(v) make an insignificant change to terms.
6-669.2
(vi) prohibit additional extensions
of credit or reduce the credit limit applicable to an agreement during
any period in which—
(A) the value of the dwelling that secures
the plan declines significantly below the dwelling’s appraised value
for purposes of the plan;
(B) the creditor reasonably believes that the consumer will be unable
to fulfill the repayment obligations under the plan because of a material
change in the consumer’s financial circumstances;
(C) the consumer is in default of any material
obligation under the agreement;
(D) the creditor is precluded by government
action from imposing the annual percentage rate provided for in the
agreement;
(E) the priority
of the creditor’s security interest is adversely affected by government
action to the extent that the value of the security interest is less
than 120 percent of the credit line; or
(F) the creditor is notified by its regulatory
agency that continued advances constitute an unsafe and unsound practice.
6-669.21
(4) for reverse-mortgage transactions that
are subject to section 226.33, terminate a plan and demand repayment
of the entire outstanding balance in advance of the orginal term except—
(i) in the case of default;
(ii) if the consumer transfers title
to the property securing the note;
(iii) if the consumer ceases using the
property securing the note as the primary dwelling; or
(iv) upon the consumer’s
death.
(h)
Imposition of nonrefundable fees. Neither a creditor nor any
other person may impose a nonrefundable fee in connection with an
application until three business days after the consumer receives
the disclosures and brochure required under this section.
10d
