Each depositor insured to at least $250,000 per insured bank

Section 226.31--General Rules

31(c)  Timing of disclosure.

1.  Furnishing disclosures. Disclosures are considered furnished when received by the consumer.

Paragraph 31(c)(1)  Disclosures for certain closed-end home mortgages.

1.  Pre-consummation waiting period. A creditor must furnish § 226.32 disclosures at least three business days prior to consummation. Under § 226.32, "business day" has the same meaning as the rescission rule in comment 2(a)(6)-2--all calendar days except Sundays and the federal legal holidays listed in 5 USC 6103(a). However, while the disclosure rule under §§ 226.15 and 226.23 extends to midnight of the third business day, the rule under § 226.32 does not. For example, under § 226.32, if disclosures were provided on a Friday, consummation could occur any time on Tuesday, the third business day following receipt of the disclosures. If the timing of the rescission rule were to be used, consummation could not occur until after midnight on Tuesday.

Paragraph 31(c)(1)(i)  Change in terms.

1.  Redisclosure required. Creditors must provide new disclosures when a change in terms makes disclosures previously provided under § 226.32(c) inaccurate, including disclosures based on and labeled as an estimate. A change in terms may result from a formal written agreement or otherwise.

2.  Sale of optional products at consummation. If the consumer finances the purchase of optional products such as credit insurance and as a result the monthly payment differs from what was previously disclosed under § 226.32, redisclosure is required and a new three-day waiting period applies. (See comment 32(c)(3)--1 on when optional items may be included in the regular payment disclosure.)

Paragraph 31(c)(1)(ii)  Telephone disclosures.

1.  Telephone disclosures. Disclosures by telephone must be furnished at least three business days prior to consummation, calculated in accord with the timing rules under § 226.31(c)(1).

Paragraph 31(c)(1)(iii)  Consumer's waiver of waiting period before consummation.

1.  Modification or waiver. A consumer may modify or waive the right to the three-day waiting period only after receiving the disclosures required by § 226.32 and only if the circumstances meet the criteria for establishing a bona fide personal financial emergency under § 226.23(e). Whether these criteria are met is determined by the facts surrounding individual situations. The imminent sale of the consumer's home at foreclosure during the three-day period is one example of a bona fide personal financial emergency. Each consumer entitled to the three-day waiting period must sign the handwritten statement for the waiver to be effective.

Paragraph 31(c)(2)  Disclosures for reverse mortgages.

1.  Business days. For purposes of providing reverse mortgage disclosures, "business day" has the same meaning as in comment 31(c)(1)--1--all calendar days except Sundays and the Federal legal holidays listed in 5 U.S.C. 6103(a). This means if disclosures are provided on a Friday, consummation could occur any time on Tuesday, the third business day following receipt of the disclosures.

2.  Open-end plans. Disclosures for open-end reverse mortgages must be provided at least three business days before the first transaction under the plan (see § 226.5(b)(1)).

31(d)  Basis of disclosures and use of estimates.

Section 226.32—Requirements for Certain Closed-End Home Mortgages

32(a)  Coverage.

Paragraph 32(a)(1)(i).

1.  Application date. An application is deemed received when it reaches the creditor in any of the ways applications are normally transmitted. (See § 226.19(a).) For example, if a borrower applies for a 10-year loan on September 30 and the creditor counteroffers with a 7-year loan on October 10, the application is deemed received in September and the creditor must measure the annual percentage rate against the appropriate Treasury security yield as of August 15. An application transmitted through an intermediary agent or broker is received when it reaches the creditor, rather than when it reaches the agent or broker. (See comment 19(b)-3 to determine whether a transaction involves an intermediary agent or broker.)

2.  When fifteenth not a business day. If the 15th day of the month immediately preceding the application date is not a business day, the creditor must use the yield as of the business day immediately preceding the 15th.

3.  Calculating annual percentage rates for variable-rate loans and discount loans. Creditors must use the rules set out in the commentary to § 226.17(c)(1) in calculating the annual percentage rate for variable-rate loans (assume the rate in effect at the time of disclosure remains unchanged) and for discount, premium, and stepped-rate transactions (which must reflect composite annual percentage rates).

4.  Treasury securities. To determine the yield on comparable Treasury securities for the annual percentage rate test, creditors may use the yield on actively traded issues adjusted to constant maturities published in the Board's "Selected Interest Rates" (statistical release H-15). Creditors must use the yield corresponding to the constant maturity that is closest to the loan's maturity. If the loan's maturity is exactly halfway between security maturities, the annual percentage rate on the loan should be compared with the yield for Treasury securities having the lower yield. In determining the loan's maturity, creditors may rely on the rules in § 226.17(c)(4) regarding irregular first payment periods. For example:

i.  If the H-15 contains a yield for Treasury securities with constant maturities of 7 years and 10 years and no maturity in between, the annual percentage rate for an 8-year mortgage loan is compared with the yield of securities having a 7-year maturity, and the annual percentage rate for a 9-year mortgage loan is compared with the yield of securities having a 10-year maturity.

ii.  If a mortgage loan has a term of 15 years, and the H-15 contains a yield of 5.21 percent for constant maturities of 10 years, and also contains a yield of 6.33 percent for constant maturities of 20 years, then the creditor compares the annual percentage rate for a 15-year mortgage loan with the yield for constant maturities of 10 years.

iii.  If a mortgage loan has a term of 30 years, and the H-15 does not contain a yield for 30-year constant maturities, but contains a yield for 20-year constant maturities, and an average yield for securities with remaining terms to maturity of 25 years and over, then the annual percentage rate on the loan is compared with the yield for 20-year constant maturities.

Paragraph 32(a)(1)(ii).

1.  Income and assets relied on. A creditor must verify the income and assets the creditor relies on to evaluate the consumer's repayment ability. For example, if a consumer earns a salary and also states that he or she is paid an annual bonus, but the creditor only relies on the applicant's salary to evaluate repayment ability, the creditor need only verify the salary.

Section 226.36—Prohibited Acts or Practices in Connection With Credit Secured by a Consumer's Principal Dwelling

1.  Effective date.  For guidance on the applicability of the rules in § 226.36, see comment 1(d)(5)--1.

36(a)  Mortgage broker defined.

1.  Meaning of mortgage broker.  Section 226.36(a) provides that a mortgage broker is any person who for compensation or other monetary gain arranges, negotiates, or otherwise obtains an extension of consumer credit for another person, but it is not an employee of a creditor. In addition, this definition expressly includes any person that satisfies this definition but makes use of "table funding." Table funding occurs when a transaction is consummated with the debt obligation initially payable by its terms to one person, but another person provides the funds for the transaction at consummation and receives an immediate assignment of the note, loan contract, or other evidence of the debt obligation. Although § 226.2(a)(17)(1)(B) provides that a person to whom a debt obligation is initially payable on its face generally is a creditor, § 226.36(a) provides that, solely for the purposes of § 226.36, such a person is considered a mortgage broker. In addition, although consumers themselves often arrange, negotiate, or otherwise obtain extensions of consumer credit on their own behalf, they do not do so for compensation or other monetary gain or for another person and, therefore, are not mortgage brokers under this section.

36(b)  Misrepresentation of value of consumer's principal dwelling.

36(b)(2)  When extension of credit prohibited.

1.  Reasonable diligence.  A creditor will be deemed to have acted with reasonable diligence under § 226.36(b)(2) if the creditor extends credit based on an appraisal other than the one subject to the restriction in § 226.36(b)(2).

2.  Material misstatement or misrepresentation.  Section 226.(b)(2) prohibits a creditor who knows of a violation of § 226.36(b)(1) in connection with an appraisal from extending credit based on such appraisal, unless the creditor documents that it has acted with reasonable diligence to determine that the appraisal does not materially misstate or misrepresent the value of such dwelling. A misstatement or misrepresentation of such dwelling's value is not material if it does not affect the credit decision or the terms on which credit is extended.

36(c)  Servicing practices.

Paragraph 36(c)(1)(i).

Section 226.46--Special Disclosure Requirements for Private Education Loans

46(a) Coverage

1.  Coverage.  This subpart applies to all private education loans as defined in § 226.46(b)(5). Coverage under this subpart is optional for certain extensions of credit that do not meet the definition of "private education loan" because the credit is not extended, in whole or in part, for "postsecondary educational expenses" defined in § 226.46(b)(3). If a transaction is not covered and a creditor opts to comply with any section of this subpart, the creditor must comply with all applicable sections of this subpart. If a transaction is not covered and a creditor opts not to comply with this subpart, the creditor must comply with all applicable requirements under §§ 226.17 and 226.18. Compliance with this subpart is optional for an extension of credit for expenses incurred after graduation from a law, medical, dental, veterinary, or other graduate school and related to relocation, study for a bar or other examination, participation in an internship or residency program, or similar purposes. However, if any part of such loan is used for postsecondary educational expenses as defined in § 226.46(b)(3), then compliance with Subpart F is mandatory not optional.

46(b) Definitions

46(b)(1) Covered Educational Institution

1.  General.  A covered educational institution includes any educational institution that meets the definition of an institution of higher education in § 226.46(b)(2). An institution is also a covered educational institution if it otherwise meets the definition of an institution of higher education, except for its lack of accreditation. Such an institution may include, for example, a university or community college. It may also include an institution, whether accredited or unaccredited, offering instruction to prepare students for gainful employment in a recognized profession, such as flying, culinary arts, or dental assistance. A covered educational institution does not include elementary or secondary schools.

2.  Agent.  For purposes of § 226.46(b)(1), the term agent means an institution-affiliated organization as defined by section 151 of the Higher Education Act of 1965 (20 U.S.C. 1019) or an officer or employee of an institution-affiliated organization. Under section 151 of the Higher Education Act, an institution-affiliated organization means any organization that is directly or indirectly related to a covered institution and is engaged in the practice of recommending, promoting, or endorsing education loans for students attending the covered institution or the families of such students. An institution-affiliated organization may include an alumni organization, athletic organization, foundation, or social, academic, or professional organization, of a covered institution, but does not include any creditor with respect to any private education loan made by that creditor.

46(b)(2) Institution of higher education.

1.  General.An institution of higher education includes any institution that meets the definitions contained in sections 101 and 102 of the Higher Education Act of 1965 (20 U.S.C. 1001--1002) and implementing Department of Education regulations (34 CFR 600).Such an institution may include, for example, a university or community college. It may also include an institution offering instruction to prepare students for gainful employment in a recognized profession, such as flying, culinary arts, or dental assistance. An institution of higher education does not include elementary or secondary schools.

46(b)(3) Postsecondary educational expenses.

1.  General.  The example listed in §226.46(b)(3) are illustrative only. The full list of postsecondary educational expenses is contained in section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll).

1.  General.  The term "preferred lender arrangement" is defined in section 151 of the Higher Education Act of 1965 (20 U.S.C. 1019). The term refers to an arrangement or agreement between a creditor and a covered educational institution (or an institution-affiliated organization as defined by section 151 of the Higher Education Act of 1965 (20 U.S.C. 1019)) under which a creditor provides private education loans to consumers for students attending the covered educational institution and the covered educational institution recommends, promotes, or endorses the private education loan products of the creditor. It does not include arrangements or agreements with respect to Federal Direct Stafford/Ford loans, or Federal PLUS loans made under the Federal PLUS auction pilot program.

46(b)(5) Private education loan.

1.  Extended expressly for postsecondary educational expenses.  A private education loan is one that is extended expressly for postsecondary educational expenses. The term includes loans extended for postsecondary educational expenses incurred while a student is enrolled in a covered educational institution as well as loans extended to consolidate a consumer's pre-existing private education loans.

2.  Multiple-purpose loans. i. Definition.  A private education loan may include an extension of credit not excluded under § 226.46(b)(5) that the consumer may use for multiple purposes including, but not limited to, postsecondary educational expenses. If the consumer expressly indicates that the proceeds of the loan will be used to pay for postsecondary educational expenses by indicating the loan's purpose on an application, the loan is a private education loan.

ii.  Coverage.  A creditor generally will not know before an application is received whether the consumer intends to use the loan for postsecondary educational expenses. For this reason, the creditor need not provide the disclosures required by § 226.47(a) on or with the application or solicitation for a loan that may be used for multiple purposes. See § 226.47(d)(1)(i). However, if the consumer expressly indicates that the proceeds of the loan will be used to pay for postsecondary educational expenses, the creditor must comply with §§ 226.47(b) and (c) and § 226.48. For purposes of the required disclosures, the creditor must calculate the disclosures based on the entire amount of the loan, even if only a part of the proceeds is intended for postsecondary educational expenses. The creditor may rely solely on a check-box, or a purpose line, on a loan application to determine whether or not the applicant intends to use loan proceeds for postsecondary educational expenses.

iii.  Examples.  The creditor must comply only if the extension of credit also meets the other parts of the definition of private education loan. For example, if the creditor uses a single application form for both open-end and closed-end credit, and the consumer applies for open-end credit to be used for postsecondary educational expenses, the extension of credit is not covered. Similarly, if the consumer indicates the extension of credit will be used for educational expenses that are not postsecondary educational expenses, such as elementary or secondary educational expenses, the extension of credit is not covered. These examples are only illustrative, not exhaustive.

3.  Short-term loans.  Some covered educational institutions offer loans to students with terms of 90 days or less to assist the student in paying for educational expenses, usually while the student waits for other funds to be disbursed. Under § 226.46(b)(5)(iv)(A) such loans are not considered private education loans, even if interest is charged on the credit balance. (Because these loans charge interest, they are not covered by the exception under § 226.46(b)(5)(iv)(B).) However, these loans are extensions of credit subject to the requirements of §§ 226.17 and 18. The legal agreement may provide that repayment is required when the consumer or the educational institution receives certain funds. If, under the terms of the legal obligation, repayment of the loan is required when the certain funds are received by the consumer or the educational institution (such as by deposit into the consumer's or educational institution's account), the disclosures should be based on the creditor's estimate of the time the funds will be delivered.

ii.  They are located on the same Web "page" as the application or solicitation reply form without necessarily appearing on the initial screen, if the application or reply form contains a clear and conspicuous reference to the location of the disclosures and indicates that the disclosures contain rate, fee, and other cost information, as applicable; or

iii.  They are posted on a Web site and the application or solicitation reply form is linked to the disclosures in a manner that prevents the consumer from bypassing the disclosures before submitting the application or reply form.

46(d) Timing of Disclosures

1.  Receipt of disclosures. Under§ 226.46(d)(4), if the creditor places the disclosures in the mail, the consumer is considered to have received them three business days after they are mailed. For purposes of § 226.46(d)(4), "business day" means all calendar days except Sundays and the legal public holidays referred to in § 226.2(a)(6). See comment 2(a)(6)--2. For example, if the creditor places the disclosures in the mail on Thursday, June 4, the disclosures are considered received on Monday, June 8.

Paragraph 46(d)(1)

1.  Invitations to apply.  A creditor may contact a consumer who has not been pre-selected for a private education loan about taking out a loan (whether by direct mail, telephone, or other means) and invite the consumer to complete an application. Such a contact does not meet the definition of solicitation, nor is it covered by this subpart, unless the contact itself includes the following:

i.  An application form in a direct mailing, electronic communication or a single application form as a "take-one" (in racks in public locations, for example);

ii.  An oral application in a telephone contact; or

iii.  An application in an in-person contact.

Paragraph 46(d)(2)

1.  Approval disclosures.  Inaccuracies in the disclosures required under § 226.47(b) are not violations if attributable to events occurring after disclosures are made, although creditors are restricted under § 226.48(c)(2) from making certain changes to the loan's rate or terms after the creditor provides an approval disclosure to a consumer. Since creditors are required to provide the final disclosures under § 226.47(c), they need not make new approval disclosures in response to an event that occurs after the creditor delivers the required approval disclosures, except as specified under § 226.48(c)(4). For example, at the time the approval disclosures are provided, the creditor may not know the precise disbursement date of the loan funds and must provide estimated disclosures based on the best information reasonably available and labeled as an estimate. If, after the approval disclosures are provided, the creditor learns from the educational institution the precise disbursement date, new approval disclosures would not be required, unless specifically required under § 226.48(c)(4) if other changes are made. Similarly, the creditor may not know the precise amounts of each loan to be consolidated in a consolidation loan transaction and information about the precise amounts would not require new approval disclosures, unless specifically required under § 226.48(c)(4) if other changes are made.

2.  Final disclosures.  Inaccuracies in the disclosures required under § 226.47(c) are not violations if attributable to events occurring after disclosures are made. For example, if the consumer initially chooses to defer payment of principal and interest while enrolled in a covered educational institution, but later chooses to make payments while enrolled, such a change does not make the original disclosures inaccurate.

Section 226.47--Content of Disclosures

1.  As applicable.  The disclosures required by this subpart need be made only as applicable, unless specifically required otherwise. The creditor need not provide any disclosure that is not applicable to a particular transaction. For example, in a transaction consolidating private education loans, or in transactions under § 226.46(a) for which compliance with this subpart is optional, the creditor need not disclose the information under §§ 226.47(a)(6), and (b)(4), and any other information otherwise required to be disclosed under this subpart that is not applicable to the transaction. Similarly, creditors making loans to consumers where the student is not attending an institution of higher education, as defined in § 226.46(b)(2), need not provide the disclosures regarding the self-certification form in § 226.47(a)(8).

47(a) Application or Solicitation Disclosures

Paragraph 47(a)(1)(i)

1.  Rates actually offered.  The disclosure may state only those rates that the creditor is actually prepared to offer. For example, a creditor may not disclose a very low interest rate that will not in fact be offered at any time. For a loan with variable interest rates, the ranges of rates will be considered actually offered if:

i.  For disclosures in applications or solicitations sent by direct mail, the rates were in effect within 60 days before mailing;

ii.  For disclosures in applications or solicitations in electronic form, the rates were in effect within 30 days before the disclosures are sent to a consumer, or for disclosures made on an Internet Web site, within 30 days before being viewed by the public;

iii.  For disclosures in printed applications or solicitations made available to the general public, the rates were in effect within 30 days before printing; or

iv.  For disclosures provided orally in telephone applications or solicitations, the rates are currently available at the time the disclosures are provided.

1.  Coverage.  The interest rate is considered variable if the terms of the legal obligation allow the creditor to increase the interest rate originally disclosed to the consumer and the requirements of section 226.47(a)(1)(iii) apply to all such transactions. The provisions do not apply to increases resulting from delinquency (including late payment), default, assumption, or acceleration.

2.  Limitations.  The creditor must disclose how often the rate may change and any limit on the amount that the rate may increase at any one time. The creditor must also disclose any maximum rate over the life of the transaction. If the legal obligation between the parties does specify a maximum rate, the creditor must disclose any legal limits in the nature of usury or rate ceilings under state or Federal statutes or regulations. However, if the applicable maximum rate is in the form of a legal limit, such as a state's usury cap (rather than a maximum rate specified in the legal obligation between the parties), the creditor must disclose that the maximum rate is determined by applicable law. The creditor must also disclose that the consumer's actual rate may be higher or lower than the initial rates disclosed under § 226.47(a)(1)(i), if applicable.

Paragraph 47(a)(1)(iv)

1.  Co-signer or guarantor--changes in applicable interest rate.  The creditor must state whether the interest rate typically will be higher if the loan is not co-signed or guaranteed by a third party. The creditor is required to provide a statement of the effect on the interest rate and is not required to provide a numerical estimate of the effect on the interest rate. For example, a creditor may state: "Rates are typically higher without a co-signer."

47(a)(2) Fees and Default or Late Payment Costs

1.  Fees or range of fees.  The creditor must itemize fees required to obtain the private education loan. The creditor must give a single dollar amount for each fee, unless the fee is based on a percentage, in which case a percentage must be stated. If the exact amount of the fee is not known at the time of disclosure, the creditor may disclose the dollar amount or percentage for each fee as an estimated range.

2.  Fees required to obtain the private education loan.The creditor must itemize the fees that the consumer must pay to obtain the private education loan. Fees disclosed include all finance charges under § 226.4, such as loan origination fees, credit report fees, and fees charged upon entering repayment, as well as fees not considered finance charges but required to obtain credit, such as application fees that are charged whether or not credit is extended. Fees disclosed include those paid by the consumer directly to the creditor and fees paid to third parties by the creditor on the consumer's behalf. Creditors are not required to disclose fees that apply if the consumer exercises an option under the loan agreement after consummation, such as fees for deferment, forbearance, or loan modification.

47(a)(3) Repayment Terms

4.  Combination with cost estimate disclosure.The disclosures of the loan term under § 226.47(a)(3)(i) and of the payment deferral options applicable while the student is enrolled at a covered educational institution under §§ 226.47(a)(3)(ii) and (iii) may be combined with the disclosure of cost estimates required in § 226.47(a)(4). For example, the creditor may describe each payment deferral option in the same chart or table that provides the cost estimates for each payment deferral option. See Appendix H--21.

5.  Bankruptcy limitations.The creditor may comply with § 226.47(a)(3)(iv) by disclosing the following statement: "If you file for bankruptcy you may still be required to pay back this loan."

47(a)(4) Cost Estimates

1.  Total cost of the loan.  For purposes of § 226.47(a)(4), the creditor must calculate the example of the total cost of the loan in accordance with the rules in § 226.18(h) for calculating the loan's total of payments.

2.  Basis for estimates.  i.  The creditor must calculate the total cost estimate by determining all finance charges that would be applicable to loans with the highest rate of interest required to be disclosed under § 226.47(a)(1)(i). For example, if a creditor charges a range of origination fees from 0% to 3%, but the 3% origination fee would apply to loans with the highest initial rate, the lender must assume the 3% origination fee is charged. The creditor must base the total cost estimate on a total loan amount that includes all prepaid finance charges and results in a $10,000 amount financed. For example, if the prepaid finance charges are $600, the creditor must base the estimate on a $10,600 total loan amount and an amount financed of $10,000. The example must reflect an amount provided of $10,000. If the creditor only offers a particular private education loan for less than $10,000, the creditor may assume a loan amount that results in a $5,000 amount financed for that loan.

1.  Notice of right to cancel.The disclosure of the right to cancel must include the specific date on which the three-day cancellation period expires and state that the consumer has a right to cancel by that date. See comments 48(d)1 and 2. For example, if the disclosures were mailed to the consumer on Friday, June 1, and the consumer is deemed to receive them on Tuesday, June 5, the creditor could state: "You have a right to cancel this transaction, without penalty, by midnight on June 8, 2009. No funds will be disbursed to you or to your school until after this time. You may cancel by calling us at 800XXXXXXX." If the creditor permits cancellation by mail, the statement must specify that the consumer's mailed request will be deemed timely if placed in the mail not later than the cancellation date specified on the disclosure. The disclosure must also specify the method or methods by which the consumer may cancel.

1.  Co-branding--definition of marketing.The prohibition on co-branding in §§ 226.48(a) and (b) applies to the marketing of private education loans. The term marketing includes any advertisement under § 226.2(a)(2). In addition, the term marketing includes any document provided by the creditor to the consumer related to a specific transaction, such as an application or solicitation, a promissory note or a contract provided to the consumer. For example, prominently displaying the name of the educational institution at the top of the application form or promissory note without mentioning the name of the creditor, such as by naming the loan product the "University of ABC Loan," would be prohibited.

2.  Implied endorsement.A suggestion that a private education loan is offered or made by the covered educational institution instead of by the creditor is included in the prohibition on implying that the covered educational institution endorses the private education loan under § 226.48(a)(1). For example, naming the loan the "University of ABC Loan," suggests that the loan is offered by the educational institution. However, the use of a creditor's full name, even if that name includes the name of a covered educational institution, does not imply endorsement. For example, a credit union whose name includes the name of a covered educational institution is not prohibited from using its own name. In addition, the authorized use of a state seal by a state or an institution of higher education in the marketing of state education loan products does not imply endorsement.

3.  Disclosure.i. A creditor is considered to have complied with § 226.48(a)(2) if the creditor's marketing contains a clear and conspicuous statement, equally prominent and closely proximate to the reference to the covered educational institution, using the name of the creditor and the name of the covered educational institution that the covered educational institution does not endorse the creditor's loans and that the creditor is not affiliated with the covered educational institution. For example, "[Name of creditor]'s loans are not endorsed by [name of school] and [name of creditor] is not affiliated with [name of school]." The statement is considered to be equally prominent and closely proximate if it is the same type size and is located immediately next to or directly above or below the reference to the educational institution, without any intervening text or graphical displays.

ii.  A creditor is considered to have complied with § 226.48(b) if the creditor's marketing contains a clear and conspicuous statement, equally prominent and closely proximate to the reference to the covered educational institution, using the name of the creditor's loan or loan program, the name of the covered educational institution, and the name of the creditor, that the creditor's loans are not offered or made by the covered educational institution, but are made by the creditor. For example, "[Name of loan or loan program] is not being offered or made by [name of school], but by [name of creditor]." The statement is considered to be equally prominent and closely proximate if it is the same type size and is located immediately next to or directly above or below the reference to the educational institution, without any intervening text or graphical displays.

Paragraph 48(c)

1.  30 day acceptance period.The creditor must provide the consumer with at least 30 calendar days from the date the consumer receives the disclosures required under § 226.47(b) to accept the terms of the loan. The creditor may provide the consumer with a longer period of time. If the creditor places the disclosures in the mail, the consumer is considered to have received them three business days after they are mailed under § 226.46(d)(4). For purposes of determining when a consumer receives mailed disclosures, "business day" means all calendar days except Sundays and the legal public holidays referred to in § 226.2(a)(6). See comment 46(d)1. The consumer may accept the loan at any time before the end of the 30 day period.

5.  Permissible changes to rates and terms--re-disclosure required.A creditor may make changes to the interest rate or terms to accommodate a request from a consumer. For example, assume a consumer applies for a $10,000 loan and is approved for the $10,000 amount at an interest rate of 6%. After the creditor has provided the approval disclosures, the consumer's financial need increases, and the consumer requests to a loan amount of $15,000. In this situation, the creditor is permitted to offer a $15,000 loan, and to make any other changes such as raising the interest rate to 7%, in response to the consumer's request. The creditor must provide a new set of disclosures under § 226.47(b) and provide the consumer with 30 days to accept the offer under § 226.48(c) for the $15,000 loan offered in response to the consumer's request. However, because the consumer may choose not to accept the offer for the $15,000 loan at the higher interest rate, the creditor may not withdraw or change the rate or terms of the offer for the $10,000 loan, except as permitted under § 226.48(c)(3), unless the consumer accepts the $15,000 loan.

Paragraph 48(d)

1.  General.  Appendix B sets forth the procedures for exemption applications. The exemption standards are found in § 226.29 and are discussed in the commentary to that section.

References

Statute:  Secs. 123 and 171(b).

Other sections:  § 226.29.

Previous regulation:  §§ 226.12, 226.50 (supplement II), 226.60 (supplement IV), and 226.70 (supplement V, section I).

1.  General.  This commentary is the vehicle for providing official staff interpretations. Individual interpretations generally will not be issued separately from the commentary.

References

Statute:  Secs. 105 and 130(f).

Other sections:  None.

Previous regulation:  § 226.1(d).

1.  General rule.  Appendix D provides a special procedure that creditors may use, at their option, to estimate and disclose the terms of multiple advance construction loans when the amounts and timing of advances are unknown at consummation of the transaction. This appendix reflects the approach taken in § 226.17(c)(6)(ii), which permits creditors to provide separate or combined disclosures for the construction period and for the permanent financing, if any; i.e., the construction phase and the permanent phase may be treated as one transaction or more than one transaction. Appendix D may also be used in multiple-advance transactions other than construction loans, when the amounts or timing of advances is unknown at consummation.

2.  Variable-rate multiple-advance loans.  The hypothetical disclosure required in variable-rate transactions by § 226.18(f)(1)(iv) is not required for multiple-advance loans disclosed pursuant to appendix D, part I.

3.  Calculation of the total of payments.   When disclosures are made pursuant to appendix D, the total of payments may reflect either the sum of the payments or the sum of the amount financed and the finance charge.

Statute:  None.

Previous regulation:  Interpretation § 226.709.

Other sections:  §§ 226.6 through 226.13, and 226.15.

1.  Daily rate with specific transaction charge.  If the finance charge results from a charge relating to a specific transaction and the application of a daily periodic rate, see comment 14(c)--6 for guidance on an appropriate calculation method.

Statute:  Section 107.

Previous regulation:  § 226.5(a)(3)(ii), footnote 5(a).

Other sections:  § 226.14.

1981 changes:  This appendix incorporates a sixth example in which the transaction amount exceeds the amount of the balance subject to the periodic rate.

Appendices G and H—Open-End and Closed-End Model Forms and Clauses

1.  Model G--1.  The model disclosures in G--1 (different balance computation methods) may be used in both the initial disclosures under § 226.6 and the periodic disclosures under § 226.7. As is clear from the models given, "shorthand" descriptions of the balance computation methods are not sufficient. The phrase "a portion of" the finance charge should be included if the total finance charge includes other amounts, such as transaction charges, that are not due to the application of a periodic rate. In addition, if unpaid finance charges are subtracted in calculating the balance, that fact must be stated so that the disclosure of the computation method is accurate. Only model G--1(b) contains a final sentence appearing in brackets which reflects the total dollar amount of payments and credits received during the billing cycle. The other models do not contain this language because they reflect plans in which payments and credits received during the billing cycle are subtracted. If this is not the case, however, the language relating to payments and credits should be changed, and the creditor should add either the disclosure of the dollar amount as in model G--1(b) or an indication of which credits (disclosed elsewhere on the periodic statement) will not be deducted in determining the balance. (Such an indication may also substitute for the bracketed sentence in model G--1(b).) See the commentary to § 226.7(e).

2.  Model G--2.  This model contains the notice of liability for unauthorized use of a credit card.

3.  Models G--3 and G--4.  These set out models for the long form billing error rights statement (for use with the initial disclosures and as an annual disclosure or, at the creditor's option, with each periodic statement) and the alternative billing error rights statement (for use with each periodic statement), respectively. Creditors must provide the billing error rights statements in a form substantially similar to the models in order to comply with the regulation. The model billing rights statements may be modified in any of the ways set forth in the first paragraph to the commentary on appendices G and H. The models may, furthermore, be modified by deleting inapplicable information, such as:

• The paragraph concerning stopping a debit in relation to a disputed amount, if the creditor does not have the ability to debit automatically the consumer's saving or checking account for payment.

1.  Models H--1 and H--2.  Creditors may make several types of changes to closed-end model forms H--1 (credit sale) and H--2 (loan) and still be deemed to be in compliance with the regulation, provided that the required disclosures are made clearly and conspicuously. Permissible changes include the addition of the information permitted by footnote 37 to § 226.17 and ``directly related'' information as set forth in the commentary to § 226.17(a).

The creditor may also delete or, on multi-purpose forms, indicate inapplicable disclosures, such as:

• The itemization of the amount financed option. (See samples H--12 through H--15.)

• The credit life and disability insurance disclosures. (See samples H--11 and H--12.)

• The property insurance disclosures. (See samples H--10 through H--12, and H--14.)

• The "filing fees" and "non-filing insurance" disclosures. (See samples H--11 and H--12.)

• The prepayment penalty or rebate disclosures. (See samples H--12 and H--14.)

• The total sale price. (See samples H--11 through H--15.)

Other permissible changes include:

• Adding the creditor's address or telephone number. (See the commentary to § 226.18(a).)

• Combining required terms where several numerical disclosures are the same, for instance, if the "total of payments" equals the "total sale price." (See the commentary to § 226.18.)

• Rearranging the sequence or location of the disclosures--for instance, by placing the descriptive phrases outside the boxes containing the corresponding disclosures, or by grouping the descriptors together as a glossary of terms in a separate section of the segregated disclosures; by placing the payment schedule at the top of the form; or by changing the order of the disclosures in the boxes, including the annual percentage rate and finance charge boxes.

• Using brackets, instead of checkboxes, to indicate inapplicable disclosures.

• Using a line for the consumer to initial, rather than a checkbox, to indicate an election to receive an itemization of the amount financed.

• Deleting captions for disclosures.

• Using a symbol, such as an asterisk, for estimated disclosures, instead of an "e."

• Adding a signature line to the insurance disclosures to reflect joint policies.

• Separately itemizing the filing fees.

• Revising the late charge disclosure in accordance with the commentary to § 226.18(l).

2.  Model H--3.  Creditors have considerable flexibility in filling out model H--3 (itemization of the amount financed). Appropriate revisions, such as those set out in the commentary to § 226.18(c), may be made to this form without loss of protection from civil liability for proper use of the model forms.

3.  Models H--4 through H--7.  The model clauses are not included in the model forms although they are mandatory for certain transactions. Creditors using the model clauses when applicable to a transaction are deemed to be in compliance with the regulation with regard to that disclosure.

15.  Sample H--12.  This sample illustrates a refinancing and consolidation loan. The amount of the loan is $5,000. There is a 15% simple interest rate and a term of three years. The date of the transaction is April 1, 1981, with the first payment due on May 1, 1981. The first 35 monthly payments are equal, with an odd final payment. The credit disability insurance premium is financed. In calculating the annual percentage rate, the U.S. Rule has been used. Since an itemization of the amount financed is included with the disclosures, the statement regarding the consumer's option to receive an itemization is deleted.

16.  Samples H--13 through H--15.  These samples illustrate various mortgage transactions. They assume that the mortgages are subject to the Real Estate Settlement Procedures Act (RESPA). As a result, no option regarding the itemization of the amount financed has been included in the samples, because providing the good faith estimates of settlement costs required by RESPA satisfies Truth in Lending's amount financed itemization requirement. (See footnote 39 to § 226.18(c).)

17.  Sample H--13.  This sample illustrates a mortgage with a demand feature. The loan amount is $44,900, payable in 360 monthly installments at a simple interest rate of 14.75%. The 15 days of interim interest ($294.34) is collected as a prepaid finance charge at the time of consummation of the loan (April 15, 1981). In calculating the disclosure amounts, the minor irregularities provision in § 226.17(c)(4) has been used. The property insurance premiums are not included in the payment schedule. This disclosure statement could be used for notes with the seven-year call option required by the Federal National Mortgage Association (FNMA) in states where due-on-sale clauses are prohibited.

18.  Sample H--14.  This sample disclosure form illustrates the disclosures under § 226.19(b) for a variable-rate transaction secured by the consumer's principal dwelling with a term greater than one year. The sample form shows a creditor how to adapt the model clauses in Appendix H--4(C) to the creditor's own particular variable-rate program. The sample disclosure form describes the features of a specific variable-rate mortgage program and alerts the consumer to the fact that information on the creditor's other closed-end variable-rate programs is available upon request. It includes information on how the interest rate is determined and how it can change over time. Section 226.19(b)(2)(viii) permits creditors the option to provide either a historical example or an initial and maximum interest rates and payments disclosure; both are illustrated in the sample disclosure. The historical example explains how the monthly payment can change based on a $10,000 loan amount, payable in 360 monthly installments, based on historical changes in the values for the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year. Index values are measured for 15 years, as of the first week ending in July. This reflects the requirement that the index history be based on values for the same date or period each year in the example. The sample disclosure also illustrates the alternative disclosure under § 226.19(b)(2)(viii)(B) that the initial and the maximum interest rates and payments be shown for a $10,000 loan originated at an initial interest rate of 12.41 percent (which was in effect July 1996) and to have 2 percentage point annual (and 5 percentage point overall) interest rate limitations or caps. Thus, the maximum amount that the interest rate could rise under this program is 5 percentage points higher than the 12.41 percent initial rate to 17.41 percent, and the monthly payment could rise from $106.03 to a maximum of $145.34. The loan would not reach the maximum interest rate until its fourth year because of the 2 percentage point annual rate limitations, and the maximum payment disclosed reflects the amortization of the loan during that period. The sample form also illustrates how to provide consumers with a method for calculating their actual monthly payment for a loan amount other than $10,000.

21.  HRSA--500--1 9--82.  Pursuant to section 113(a) of the Truth in Lending Act, Form HRSA--500--1 9--82 issued by the U.S. Department of Health and Human Services for certain student loans has been approved for use for loans made prior to the mandatory compliance date of the disclosures required under Subpart F. The form was approved for all Health Education Assistance Loans (HEAL) with a variable interest rate that were considered interim student credit extensions as defined in Regulation Z.

22.  HRSA--500--2 9--82.  Pursuant to section 113(a) of the Truth in Lending Act, Form HRSA--500--2 9--82 issued by the U.S. Department of Health and Human Services for certain student loans has been approved for use for loans made prior to the mandatory compliance date of the disclosures required under Subpart F. The form was approved for all HEAL loans with a fixed interest rate that were considered interim student credit extensions as defined in Regulation Z.

ii.  Although creditors are not required to use a certain paper size in disclosing the §§ 226.47(a), (b) and (c) disclosures, samples H--21, H--22, and H--23 are designed to be printed on two 81/2 x 11 inch sheets of paper. A creditor may use a larger sheet of paper, such as 81/2 x 14 inch sheets of paper, or may use multiple pages. If the disclosures are provided on two sides of a single sheet of paper, the creditor must include a reference or references, such as "SEE BACK OF PAGE" at the bottom of each page indicating that the disclosures continue onto the back of the page. If the disclosures are on two or more pages, a creditor may not include any intervening information between portions of the disclosure. In addition, the following formatting techniques were used in presenting the information in the sample tables to ensure that the information is readable:

A.  A readable font style and font size (10-point Helvetica font style for body text).

B.  Sufficient spacing between lines of the text.

Statute:  Section 108.

Other sections:   None.

Previous regulation:  § 226.1(b).

1.  Use of Appendix J.  Appendix J sets forth the actuarial equations and instructions for calculating the annual percentage rate in closed-end credit transactions. While the formulas contained in this appendix may be directly applied to calculate the annual percentage rate for an individual transaction, they may also be utilized to program calculators and computers to perform the calculations.

2.  Relation to Board tables.  The Board's Annual Percentage Rate Tables also provide creditors with a calculation tool that applies the technical information in appendix J. An annual percentage rate computed in accordance with the instructions in the tables is deemed to comply with the regulation. Volume I of the tables may be used for credit transactions involving equal payment amounts and periods, as well as for transactions involving any of the following irregularities: odd first period, odd first payment and odd last payment. Volume II of the tables may be used for transactions that involve any type of irregularities. These tables may be obtained from any Federal Reserve Bank or from the Board in Washington, D.C. 20551, upon request.

References

Statute:  Section 107.

Other sections:  § 226.22.

1.  General. The calculation of total annual loan cost rates under appendix K is based on the principles set forth and the estimation or "iteration" procedure used to compute annual percentage rates under appendix J. Rather than restate this iteration process in full, the regulation cross-references the procedures found in appendix J. In other aspects the appendix reflects the special nature of reverse mortgage transactions. Special definitions and instructions are included where appropriate.

(b)  Instructions and equations for the total annual loan cost rate.

(b)(5)  Number of unit-periods between two given dates.

1.  Assumption as to when transaction beings. The computation of the total annual loan cost rate is based on the assumption that the reverse mortgage transaction begins on the first day of the month in which consummation is estimated to occur. Therefore, fractional unit-periods (used under appendix J for calculating annual percentage rates) are not used.

(b)(9)  Assumption for discretionary cash advances.

1.  Amount of credit. Creditors should compute the total annual loan cost rates for transactions involving discretionary cash advances by assuming that 50 percent of the initial amount of the credit available under the transaction is advanced at closing or, in an open-end transaction, when the consumer becomes obligated under the plan. (For the purposes of this assumption, the initial amount of the credit is the principal loan amount less any costs to the consumer under section 226.33(c)(1).)

(b)(10)  Assumption for variable-rate reverse mortgage transactions.

1.  Initial discount or premium rate. Where a variable-rate reverse mortgage transaction includes an initial discount or premium rate, the creditor should apply the same rules for calculating the total annual loan cost rate as are applied when calculating the annual percentage rate for a loan with an initial discount or premium rate (see the commentary to § 226.17(c)).

(d)  Reverse mortgage model form and sample form.

(d)(2)  Sample form.

1.  General. The life expectancy figures used in appendix L are those found in the U.S. Decennial Life Tables for women, as rounded to the nearest whole year and as published by the U.S. Department of Health and Human Services. The figures contained in appendix L must be used by creditors for all consumers (men and women). Appendix L will be revised periodically by the Board to incorporate revisions to the figures made in the Decennial Tables.