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Truth in Lending: 18(s)(3) Payments for Amortizing Loans.

1. Payments corresponding to interest rates. Creditors must disclose the periodic payment that corresponds to each interest rate disclosed under § 1026.18(s)(2)(i)(A)–(C). The corresponding periodic payment is the regular payment for each such interest rate, without regard to any final payment that differs from others because of the rounding of periodic payments to account for payment amounts including fractions of cents. Balloon payments, however, must be disclosed as provided in § 1026.18(s)(5).

Truth in Lending: 18(s)(3)(ii) Interest-Only Payments.

1. Interest-only loans that are also negative amortization loans. The rules in § 1026.18(s)(3)(ii) for disclosing payments on interest-only loans apply only if the loan is not also a negative amortization loan. If the loan is a negative amortization loan, even if it also has an interest-only feature, payments are disclosed under the rules in § 1026.18(s)(4).

Paragraph 18(s)(3)(ii)(C)

Truth in Lending: 18(s)(4) Payments for Negative Amortization Loans.

1. Table. Section 1026.18(s)(1) provides that tables shall include only the information required in § 1026.18(s)(2)–(4). Thus, a table for a negative amortization loan must contain no more than two horizontal rows of payments and no more than five vertical columns of interest rates.

Truth in Lending: 18(s)(5) Balloon Payments.

1. General. A balloon payment is one that is more than two times the regular periodic payment. In a reverse mortgage transaction, the single payment is not considered a balloon payment. A balloon payment must be disclosed outside and below the table, unless the balloon payment coincides with an interest rate adjustment or a scheduled payment increase. In those cases, the balloon payment must be disclosed in the table.

Truth in Lending: 18(s)(6) Special Disclosures for Loans With Negative Amortization.

1. Escrows.157 See the commentary under § 1026.18(s)(3)(i)(C) for guidance on escrows for purposes of § 1026.18(s)(6). Under that guidance, because mortgage insurance payments and functionally equivalent fees decline over a loan’s term, the payment amounts shown in the table should reflect the mortgage insurance payment and functionally equivalent fees that will be applicable at the time each disclosed periodic payment will be in effect.

Truth in Lending: 18(s)(7) Definitions.

1. Negative amortization loans. Under § 1026.18(s)(7)(v), a negative amortization loan is one that requires only a minimum periodic payment that covers only a portion of the accrued interest, resulting in negative amortization. For such a loan, § 1026.18(s)(4)(iii) requires creditors to disclose the fully amortizing periodic payment for each interest rate disclosed under § 1026.18(s)(2)(ii), in addition to the minimum periodic payment, regardless of whether the legal obligation explicitly recites that the consumer may make the fully amortizing payment.

Truth in Lending: 19(a)(1)(i) Time of Disclosures.

1. Coverage.158 Section 1026.19(a) requires early disclosure of credit terms in reverse mortgage transactions subject to § 1026.33 that are secured by a consumer’s dwelling that are also subject to the Real Estate Settlement Procedures Act (RESPA) and its implementing Regulation X. To be covered by § 1026.19(a), a transaction must be a Federally related mortgage loan under RESPA. “Federally related mortgage loan” is defined under RESPA (12 U.S.C.

Truth in Lending: 19(a)(1)(ii) Imposition of Fees.

1. Timing of fees. The consumer must receive the disclosures required by this section before paying or incurring any fee imposed by a creditor or other person in connection with the consumer’s application for a mortgage transaction that is subject to § 1026.19(a)(1)(i), except as provided in § 1026.19(a)(1)(iii). If the creditor delivers the disclosures to the consumer in person, a fee may be imposed anytime after delivery.

Truth in Lending: 19(a)(1)(iii) Exception to Fee Restriction.

1. Requirements. A creditor or other person may impose a fee before the consumer receives the required disclosures if it is for obtaining the consumer’s credit history, such as by purchasing a credit report(s) on the consumer. The fee also must be bona fide and reasonable in amount. For example, a creditor may collect a fee for obtaining a credit report(s) if it is in the creditor’s ordinary course of business to obtain a credit report(s).

Truth in Lending: 19(a)(3) Consumer’s Waiver of Waiting Period Before Consummation.

1. Modification or waiver. A consumer may modify or waive the right to a waiting period required by § 1026.19(a)(2) only after the creditor makes the disclosures required by § 1026.18. The consumer must have a bona fide personal financial emergency that necessitates consummating the credit transaction before the end of the waiting period. Whether these conditions are met is determined by the facts surrounding individual situations.

Truth in Lending: 19(a)(4) Notice.

1. Inclusion in other disclosures. The notice required by § 1026.19(a)(4) must be grouped together with the disclosures required by § 1026.19(a)(1)(i) or § 1026.19(a)(2). See comment 17(a)(1)-2 for a discussion of the rules for segregating disclosures. In other cases, the notice set forth in § 1026.19(a)(4) may be disclosed together with or separately from the disclosures required under § 1026.18. See comment 17(a)(1)-5.xvi.

Truth in Lending: 19(b) Certain Variable-Rate Transactions.

1. Coverage. Section 1026.19(b) applies to all closed-end variable-rate transactions that are secured by the consumer’s principal dwelling and have a term greater than one year. The requirements of this section apply not only to transactions financing the initial acquisition of the consumer’s principal dwelling, but also to any other closed-end variable-rate transaction secured by the principal dwelling.

Truth in Lending: 19(e)(1)(i) Creditor.

1. Requirements.163 Section 1026.19(e)(1)(i) requires early disclosure of credit terms in closed-end credit transactions that are secured by real property or a cooperative unit, other than reverse mortgages. These disclosures must be provided in good faith. Except as otherwise provided in § 1026.19(e), a disclosure is in good faith if it is consistent with § 1026.17(c)(2)(i).

Truth in Lending: 19(e)(1)(iii) Timing.

1. Timing and use of estimates. The disclosures required by § 1026.19(e)(1)(i) must be delivered not later than three business days after the creditor receives the consumer’s application. For example, if an application is received on Monday, the creditor satisfies this requirement by either hand delivering the disclosures on or before Thursday, or placing them in the mail on or before Thursday, assuming each weekday is a business day.

Truth in Lending: 19(e)(1)(iv) Receipt of early disclosures.

1. Mail delivery. Section 1026.19(e)(1)(iv) provides that, if any disclosures required under § 1026.19(e)(1)(i) are not provided to the consumer in person, the consumer is considered to have received the disclosures three business days after they are delivered or placed in the mail. The creditor may, alternatively, rely on evidence that the consumer received the disclosures earlier than three business days.

Truth in Lending: 19(e)(1)(v) Consumer’s waiver of waiting period before consummation.

1. Modification or waiver. A consumer may modify or waive the right to the seven-business-day waiting period required by § 1026.19(e)(1)(iii) only after the creditor makes the disclosures required by § 1026.19(e)(1)(i). The consumer must have a bona fide personal financial emergency that necessitates consummating the credit transaction before the end of the waiting period. Whether these conditions are met is determined by the circumstances of the individual situation.

Truth in Lending: 19(e)(2)(i)(A) Fee restriction.

1. Fees restricted. A creditor or other person may not impose any fee, such as for an application, appraisal, or underwriting, until the consumer has received the disclosures required by § 1026.19(e)(1)(i) and indicated an intent to proceed with the transaction. The only exception to the fee restriction allows the creditor or other person to impose a bona fide and reasonable fee for obtaining a consumer’s credit report, pursuant to § 1026.19(e)(2)(i)(B).

Truth in Lending: 19(e)(2)(i)(B) Exception to fee restriction.

1. Requirements. A creditor or other person may impose a fee before the consumer receives the required disclosures if the fee is for purchasing a credit report on the consumer. The fee also must be bona fide and reasonable in amount. For example, a creditor or other person may collect a fee for obtaining a credit report if it is in the creditor’s or other person’s ordinary course of business to obtain a credit report.

Truth in Lending: 19(e)(2)(ii) Written information provided to consumer.

1. Requirements. Section 1026.19(e)(2)(ii) requires the creditor or other person to include a clear and conspicuous statement on the top of the front of the first page of a written estimate of terms or costs specific to the consumer if it is provided to the consumer before the consumer receives the disclosures required by § 1026.19(e)(1)(i).

Truth in Lending: 19(e)(2)(iii) Verification of information.

1. Requirements. The creditor or other person may collect from the consumer any information that it requires prior to providing the early disclosures before or at the same time as collecting the information listed in § 1026.2(a)(3)(ii). However, the creditor or other person is not permitted to require, before providing the disclosures required by § 1026.19(e)(1)(i), that the consumer submit documentation to verify the information collected from the consumer. See also § 1026.2(a)(3) and the related commentary regarding the definition of application.