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• Federal Issues
• Firm News
• Consumer Finance
Federal Reserve Board Approves Interim Rule Amending Regulation Z Disclosure Requirements. On December 22, the Federal Reserve Board (FRB) approved a new interim rule amending Regulation Z, which implements the Truth in Lending Act (TILA). The new interim rule clarifies aspects of a previous interim rule issued on September 24, 2010, implementing provisions of the Mortgage Disclosure Improvement Act (MDIA), which amended TILA to require mortgage lenders to disclose examples of how a loan’s interest rate or payments can change. Those MDIA provisions become effective January 30, 2011. Under the September interim rule, lenders’ cost disclosures must include a payment summary in the form of a table stating the initial rate and corresponding periodic payment and, for adjustable rate loans, the maximum rate and payment that can occur during the first five years as well as a "worst case" example showing the maximum rate and payment possible over the life of the loan. The new interim rule clarifies that creditors’ disclosures should reflect the first rate adjustment for a 5/1 adjustable rate mortgage, and should show the earliest date the consumer’s interest rate can change rather than the due date for making the first payment under the new rate for interest-only loans. The rule also clarifies which mortgage transactions are covered by the special disclosure requirements for loans that allow minimum payments that cause the loan balance to increase. Creditors may comply with either the September interim rule or the new interim rule until October 1, 2011, at which time compliance with the new interim rule will become mandatory. The FRB is accepting public comment on the interim rule for 60 days after publication in the Federal Register.
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