For each transaction, the creditor
shall disclose the following information as applicable:
(a) Creditor. The identity
of the creditor making the disclosures.
(b) Amount financed. The “amount financed,”
using that term, and a brief description such as “the amount of credit
provided to you or on your behalf.” The amount financed is calculated
by—
(1) Determining the principal
loan amount or the cash price (subtracting any downpayment);
(2) Adding any other amounts
that are financed by the creditor and are not part of the finance
charge; and
(3) Subtracting
any prepaid finance charge.
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(c) Itemization of amount financed.
(1) A separate written itemization of the
amount financed, including:
40(i) The amount of any proceeds distributed
directly to the consumer.
(ii) The amount credited to the consumer’s
account with the creditor.
(iii) Any amounts paid to other persons
by the creditor on the consumer’s behalf. The creditor shall identify
those persons.
41(iv) The prepaid
finance charge.
(2) The creditor need not comply with paragraph
(c)(1) of this section if the creditor provides a statement that the
consumer has the right to receive a written itemization of the amount
financed, together with a space for the consumer to indicate whether
it is desired, and the consumer does not request it.
(d) Finance charge. The “finance charge,” using that term, and a brief description such
as “the dollar amount the credit will cost you.”
(1) Mortgage
loans. In a transaction secured by real property or a dwelling,
the disclosed finance charge and other disclosures affected by the
disclosed finance charge (including the amount financed and the annual
percentage rate) shall be treated as accurate if the amount disclosed
as the finance charge—
(i) is understated by no more than $100;
or
(ii) is greater
than the amount required to be disclosed.
(2) Other credit. In any other transaction, the amount disclosed
as the finance charge shall be treated as accurate if, in a transaction
involving an amount financed of $1,000 or less, it is not more than
$5 above or below the amount required to be disclosed; or, in a transaction
involving an amount financed of more than $1,000, it is not more than
$10 above or below the amount required to be disclosed.
(e)
Annual percentage rate. The “annual percentage rate,” using that term, and a brief description
such as “the cost of your credit as a yearly rate.”
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(f) Variable rate.
(1) If the annual percentage rate may in
crease
after consummation in a transaction not secured by the consumer’s
principal dwelling or in a transaction secured by the consumer’s principal
dwelling with a term of one year or less, the following
disclosures:
43(i) The circumstances under which the
rate may increase.
(ii) Any limitations on the increase.
(iii) The effect of an increase.
(iv) An example of
the payment terms that would result from an increase.
(2) If the annual percentage
rate may increase after consummation in a transaction secured by the
consumer’s principal dwelling with a term greater than one year, the
following disclosures:
(i) The fact that the transaction contains
a variable-rate feature.
(ii) A statement that variable-rate
disclosures have been provided earlier.
6-837.1
(g) Payment schedule. Other
than for a transaction that is subject to paragraph (s) of this section,
the number, amounts, and timing of payments scheduled to repay the
obligation.
(1) In a demand obligation
with no alternate maturity date, the creditor may comply with this
paragraph by disclosing the due dates or payment periods of any scheduled
interest payments for the first year.
(2) In a transaction in which a series
of payments varies because a finance charge is applied to the unpaid
principal balance, the creditor may comply with this paragraph by
disclosing the following information:
(i) The dollar amounts
of the largest and smallest payments in the series.
(ii) A reference to the variations in
the other payments in the series.
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(h)
Total of payments. The “total
of payments,” using that term, and a descriptive explanation such
as “the amount you will have paid when you have made all scheduled
payments.”
44(i) Demand feature. If the obligation has a
demand feature, that fact shall be disclosed. When the disclosures
are based on an assumed maturity of one year as provided in section
226.17(c)(5), that fact shall also be disclosed.
(j) Total sale price. In a credit
sale, the “total sale price,” using that term, and a descriptive explanation
(including the amount of any downpayment) such as “the total price
of your purchase on credit, including your downpayment of $
.” The total sale price is the sum of the cash price, the items
described in paragraph (b)(2), and the finance charge disclosed under
paragraph (d) of this section. (k) Prepayment.
(1) When an obligation includes a finance
charge computed from time to time by application of a rate to the unpaid
principal balance, a statement indicating whether or not a penalty
may be imposed if the obligation is prepaid in full.
(2) When an obligation includes a finance
charge other than the finance charge described in paragraph (k)(1)
of this section, a statement indicating whether or not the consumer
is entitled to a rebate of any finance charge if the obligation is
prepaid in full.
(l) Late payment. Any dollar or percentage
charge that may be imposed before maturity due to a late payment,
other than a deferral or extension charge.
(m) Security interest. The fact that the creditor
has or will acquire a security interest in the property purchased
as part of the transaction, or in other property identified by item
or type.
(n) Insurance
and debt cancellation. The items required by section 226.4(d)
in order to exclude certain insurance premiums and debt-cancellation
fees from the finance charge.
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(o) Certain security-interest charges. The
disclosures required by section 226.4(e) in order to exclude from
the finance charge certain fees prescribed by law or certain premiums
for insurance in lieu of perfecting a security interest.
(p) Contract reference. A statement that the consumer should refer to the appropriate contract
document for information about nonpayment, default, the right to accelerate
the maturity of the obligation, and prepayment rebates and penalties.
At the creditor’s option, the statement may also include a reference
to the contract for further information about security interests and,
in a residential mortgage transaction, about the creditor’s policy
regarding assumption of the obligation.
(q) Assumption policy. In a residential mortgage
transaction, a statement whether or not a subsequent purchaser of
the dwelling from the consumer may be permitted to assume the remaining
obligation on its original terms.
(r)
Required deposit. If the creditor requires
the consumer to maintain a deposit as a condition of the specific
transaction, a statement that the annual percentage rate does not
reflect the effect of the required deposit.
45(s) Interest
rate and payment summary for mortgage transactions. For a closed-end
transaction secured by real property or a dwelling, other than a transaction
secured by a consumer’s interest in a timeshare plan described in
11 U.S.C. 101(53D), the creditor shall disclose the following information
about the interest rate and payments:
(1) Form of disclosures. The information in paragraphs (s)(2)-(4) of this section shall be
in the form of a table, with no more than five columns, with headings
and format substantially similar to Model Clause H-4(E), H-4(F), H-4(G),
or H-4(H) in Appendix H to this part. The table shall contain only
the information required in paragraphs (s)(2)-(4) of this section,
shall be placed in a prominent location, and shall be in a minimum
10-point font.
(2) Interest rates.
(i) Amortizing loans.
(A) For a fixed-rate
mortgage, the interest rate at consummation.
(B) For an adjustable-rate or step-rate mortgage—
(1) The interest rate at consummation
and the period of time until the first interest rate adjustment may
occur, labeled as the “introductory rate and monthly payment”;
(2) The maximum
interest rate that may apply during the first five years after the
date on which the first regular periodic payment will be due and the
earliest date on which that rate may apply, labeled as “maximum during
first five years”; and
(3) The maximum interest rate that may apply during the life
of the loan and the earliest date on which that rate may
apply, labeled as “maximum ever.”
(C) If the loan provides for payment increases
as described in paragraph (s)(3)(i)(B) of this section, the interest
rate in effect at the time the first such payment increase is scheduled
to occur and the date on which the increase will occur, labeled as
“first adjustment” if the loan is an adjustable-rate mortgage or,
otherwise, labeled as “first increase.”
(ii) Negative amortization loans. For a negative
amortization loan—
(A) The interest rate at consummation and,
if it will adjust after consummation, the length of time until it
will adjust, and the label “introductory” or “intro”;
(B) The maximum interest rate that could apply
when the consumer must begin making fully amortizing payments under
the terms of the legal obligation;
(C) If the minimum required payment will increase
before the consumer must begin making fully amortizing payments, the
maximum interest rate that could apply at the time of the first payment
increase and the date the increase is scheduled to occur; and
(D) If a second increase in the
minimum required payment may occur before the consumer must begin
making fully amortizing payments, the maximum interest rate that could
apply at the time of the second payment increase and the date the
increase is scheduled to occur.
(iii) Introductory
rate disclosure for amortizing adjustable-rate mortgages. For
an amortizing adjustable-rate mortgage, if the interest rate at consummation
is less than the fully-indexed rate, placed in a box directly beneath
the table required by paragraph (s)(1) of this section, in a format
substantially similar to Model Clause H-4(I) in Appendix H to this
part—
(A) The interest rate that applies at consummation
and the period of time for which it applies;
(B) A statement that, even if market rates
do not change, the interest rate will increase at the first adjustment
and a designation of the place in sequence of the month or year, as
applicable, of such rate adjustment; and
(C) The fully-indexed rate.
(3) Payments for amortizing loans.
(i) Principal and interest payments. If all
periodic payments will be applied to accrued interest and principal,
for each interest rate disclosed under paragraph (s)(2)(i) of this
section—
(A) The corresponding periodic principal and
interest payment, labeled as “principal and interest;”
(B) If the periodic payment may
increase without regard to an interest rate adjustment, the payment
that corresponds to the first such increase and the earliest date
on which the increase could occur;
(C) If an escrow account will be established,
an estimate of the amount of taxes and insurance, including any mortgage
insurance, payable with each periodic payment; and
(D) The sum of the amounts disclosed under
paragraphs (s)(3)(i)(A) and (C) of this section or (s)(3)(i)(B) and
(C) of this section, as applicable, labeled as “total estimated monthly
payment.”
(ii) Interest-only
payments. If the loan is an interest-only loan, for each interest
rate disclosed under paragraph (s)(2)(i) of this section, the corresponding
periodic payment and—
(A) If the payment will be applied to only
accrued interest, the amount applied to interest, labeled as “interest
payment,” and a statement that none of the payment is being applied
to principal;
(B) If the
payment will be applied to accrued interest and principal, an itemization
of the amount of the first such payment applied to accrued interest
and to principal, labeled as “interest payment” and “principal payment,”
respectively;
(C) The escrow
information described in paragraph (s)(3)(i)(C) of this section; and
(D) The sum of all amounts
required to be disclosed under paragraphs (s)(3)(ii)(A) and (C) of
this section or (s)(3)(ii)(B) and (C) of this section, as applicable,
labeled as “total estimated monthly payment.”
(4) Payments for negative amortization loans. For negative amortization loans:
(i) (A) The
minimum periodic payment required until the first payment increase
or interest rate increase, corresponding to the interest rate disclosed
under paragraph (s)(2)(ii)(A) of this section;
(B) The minimum periodic payment that would
be due at the first payment increase and the second, if any, corresponding
to the interest rates described in paragraphs (s)(2)(ii)(C) and (D)
of this section; and
(C)
A statement that the minimum payment pays only some interest, does
not repay any principal, and will cause the loan amount to increase;
(ii)
The fully amortizing periodic payment amount at the earliest time
when such a payment must be made, corresponding to the interest rate
disclosed under paragraph (s)(2)(ii)(B) of this section; and
(iii) If applicable, in
addition to the payments in paragraphs (s)(4)(i) and (ii) of this
section, for each interest rate disclosed under paragraph (s)(2)(ii)
of this section, the amount of the fully amortizing periodic payment,
labeled as the “full payment option,” and a statement that these payments
pay all principal and all accrued interest.
(5) Balloon payments.
(i) Except as provided in paragraph
(s)(5)(ii) of this section, if the transaction will require a balloon
payment, defined as a payment that is more than two times a regular
periodic payment, the balloon payment shall be disclosed separately
from other periodic payments disclosed in the table under this paragraph
(s), outside the table and in a manner substantially similar to Model
Clause H-4(J) in Appendix H to this part.
(ii) If the balloon payment is scheduled
to occur at the same time as another payment required to be disclosed
in the table pursuant to paragraph (s)(3) or (s)(4) of this section,
then the balloon payment must be disclosed in the table.
(6) Special disclosures for loans with negative amortization. For
a negative amortization loan, the following information, in close
proximity to the table required in paragraph (s)(1) of this section,
with headings, content, and format substantially similar to Model
Clause H-4(G) in Appendix H to this part:
(i) The maximum interest
rate, the shortest period of time in which such interest rate could
be reached, the amount of estimated taxes and insurance included in
each payment disclosed, and a statement that the loan offers payment
options, two of which are shown.
(ii) The dollar amount of the increase
in the loan’s principal balance if the consumer makes only the minimum
required payments for the maximum possible time and the earliest date
on which the consumer must begin making fully amortizing payments,
assuming that the maximum interest rate is reached at the earliest
possible time.
(7) Definitions. For purposes of this section 226.18(s):
(i) The term “adjustable-rate
mortgage” means a transaction secured by real property or a dwelling
for which the annual percentage rate may increase after consummation.
(ii) The term “step-rate
mortgage” means a transaction secured by real property or a dwelling
for which the interest rate will change after consummation, and the
rates that will apply and the periods for which they will apply are
known at consummation.
(iii) The term “fixed-rate mortgage” means a transaction secured
by real property or a dwelling that is not an adjustable-rate mortgage or a
step-rate mortgage.
(iv) The term “interest-only” means that, under the terms of the
legal obligation, one or more of the periodic payments may be applied
solely to accrued interest and not to loan principal; an “interest-only
loan” is a loan that permits interest-only payments.
(v) The term “amortizing loan” means
a loan in which payment of the periodic payments does not result in
an increase in the principal balance under the terms of the legal
obligation; the term “negative amortization” means payment of periodic
payments that will result in an increase in the principal balance
under the terms of the legal obligation; the term “negative amortization
loan” means a loan, other than a reverse mortgage subject to section
226.33, that provides for a minimum periodic payment that covers only
a portion of the accrued interest, resulting in negative amortization.
(vi) The term “fully-indexed
rate” means the interest rate calculated using the index value and
margin at the time of consummation.
(t) “No-guarantee-to-refinance”
statement.
(1) Disclosure. For a closed-end transaction secured by real property or a dwelling,
other than a transaction secured by a consumer’s interest in a timeshare
plan described in 11 U.S.C. 101(53D), the creditor shall disclose
a statement that there is no guarantee the consumer can refinance
the transaction to lower the interest rate or periodic payments.
(2) Format. The statement required by paragraph
(t)(1) of this section must be in a form substantially similar to
Model Clause H-4(K) in Appendix H to this part.
