The Federal Reserve Board issued an interim rule on December 22, 2010, amending Regulation Z and clarifying certain aspects of the September 24, 2010 interim rule. The Board revisited 12 CFR §226.18(s)(2)(i)(B)(2) to clarify that creditors must disclose the maximum possible rate that will apply at any time during the first five years after the date on which the first regular periodic payment will be due, rather than the first five years after consummation.
For an interest-only loan, the September 2010 interim rule requires the creditor to disclose the earliest date that the payment will be applied to both accrued interest and principal. The December 2010 interim rule clarifies that for interest-only loans the “maximum during first five years” and “maximum ever” columns of the interest rate and payment summary table should reflect the earliest date that the interest rate becomes effective rather than the date that the first payment is due under the new rate.
Instead of waiting until the mandatory use date of October 1, 2011, the ConformX software and documents were modified to follow all requirements contained in the December 22, 2010 interim rule in time for the effective date of January 30, 2011. Therefore no further ConformX software or document updates are needed at this time.
Beginning October 1, 2011, the following warning message will appear in ConformX if the old version of the TIL is being used on a loan:
“The old pre-January 2011 version of the Truth-in-Lending Disclosure Statement is set to print for this loan. Compliance with the Regulation Z interim rule released by the Federal Reserve Board December 22, 2010, is mandatory for transactions for which an application for credit is received by the creditor on or after October 1, 2011. Some investors will not purchase loans that use the old version of the TIL after October 1, 2011, regardless of application date.”
September 29, 2011