Our most widely-used ARM Disclosures (Cx13457 and Cx14089) provide the disclosures required under 12 CFR § 1026.19(b). Pursuant to a review, Cx13457 and Cx14089 are being modified to enhance the disclosures for ARM Construction and Construction-to-Permanent loans. Appendix D to Part 1026 allows two different disclosure methods to be used to estimate the interest portion of the finance charge and the annual percentage rate: “Type A” and “Type B”.
Charging construction interest using the “Type A” method means that only the interest payable on the amount actually advanced is used in the calculations. Since the amount actually advanced is dependent on many factors, it is customary to disclose “Type A” calculations as an estimate, using one half of the loan amount to provide the estimated disclosures. The “Type B” method of charging construction interest means that the interest is charged based on the total loan amount throughout the entire construction period, regardless of the amounts actually advanced. Previously, only “Type A” was disclosed. In order to accommodate both “Type A” and “Type B” disclosure methods, new fields have been created to allow both methods of calculation for the Payment Example paragraphs. With these new fields, the Payment Examples will be generated appropriately based on whether the field “Construction Calculation Type” (Field 51812) is “A: Interest on Amount Advanced” or “B: Interest on Full Loan Amount”.
These changes will be in effect on January 13, 2018. If you have any questions or concerns about this change, please contact Client Support at 1.800.497.3584.