Regulation Z
Truth in Lending Act

Appendix A to Part 226--Effect on State Laws
Appendix B to Part 226--State Exemptions
Appendix C to Part 226--Issuance of Staff Interpretations
Appendix D to Part 226--Multiple Advance Construction Loans
Appendix E to Part 226--Rules For Card Issuers That Bill On a Transaction-By-Transaction Basis
Appendix F to Part 226--Annual Percentage Rate Computations for Certain Open-End Credit Plans
Appendix G to Part 226--Open-End Model Forms and Clauses
Appendix H to Part 226--Closed-End Model Forms and Clauses
Appendix I to Part 226--Federal Enforcement Agencies
Appendix J to Part 226--Annual Percentage Rate Computations For Closed- End Credit Transactions
Appendix K to Part 226--Total Annual Loan Cost Rate Computations for Reverse Mortgage Transactions
Appendix L to Part 226--Assumed Loan Periods for Computations of Total Annual Loan Cost Rates

Appendix A--Effect on State Laws

Request for Determination
 

     A request for a determination that a State law is inconsistent or that a State law is substantially the same as the Act and regulation shall be in writing and addressed to the Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551. The request shall be made pursuant to the procedures herein and the Board's Rules of Procedure (12 CFR Part 262).

Supporting Documents

     A request for a determination shall include the following items:
     (1) The text of the State statute, regulation, or other document that is the subject of the request.
     (2) Any other statute, regulation, or judicial or administrative opinion that implements, interprets, or applies the relevant provision.
     (3) A comparison of the State law with the corresponding provision of the Federal law, including a full discussion of the basis for the requesting party's belief that the State provision is either inconsistent or substantially the same.
     (4) Any other information that the requesting party believes may assist the Board in its determination.

Public Notice of Determination

     Notice that the Board intends to make a determination (either on request or on its own motion) will be published in the Federal Register, with an opportunity for public comment, unless the Board finds that notice and opportunity for comment would be impracticable, unnecessary, or contrary to the public interest and publishes its reasons for such decision.
     Subject to the Board's Rules Regarding Availability of Information (12 CFR Part 261), all requests made, including any documents and other material submitted in support of the requests, will be made available for public inspection and copying.

Notice After Determination

     Notice of a final determination will be published in the Federal Register, and the Board will furnish a copy of such notice to the party who made the request and to the appropriate State official.
Reversal of Determination

     The Board reserves the right to reverse a determination for any reason bearing on the coverage or effect of State or Federal law.
     Notice of reversal of a determination will be published in the Federal Register and a copy furnished to the appropriate State official.
 

Appendix B--State Exemptions

Application

     Any State may apply to the Board for a determination that a class of transactions subject to State law is exempt from the requirements of the Act and this regulation. An application shall be in writing and addressed to the Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, and shall be signed by the appropriate State official. The application shall be made pursuant to the procedures herein and the Board's Rules of Procedure (12 CFR Part 262).
Supporting Documents

     An application shall be accompanied by:
     (1) The text of the State statute or regulation that is the subject of the application, and any other statute, regulation, or judicial or administrative opinion that implements, interprets, or applies it.
     (2) A comparison of the State law with the corresponding provisions of the Federal law.
     (3) The text of the State statute or regulation that provides for civil and criminal liability and administrative enforcement of the State law.
     (4) A statement of the provisions for enforcement, including an identification of the State office that administers the relevant law, information on the funding and the number and qualifications of personnel engaged in enforcement, and a description of the enforcement procedures to be followed, including information on examination procedures, practices, and policies. If an exemption application extends to federally chartered institutions, the applicant must furnish evidence that arrangements have been made with the appropriate Federal agencies to ensure adequate enforcement of State law in regard to such creditors.
     (5) A statement of reasons to support the applicant's claim that an exemption should be granted.

Public Notice of Application

     Notice of an application will be published, with an opportunity for public comment, in the Federal Register, unless the Board finds that notice and opportunity for comment would be impracticable, unnecessary, or contrary to the public interest and publishes its reasons for such decision.
     Subject to the Board's Rules Regarding Availability of Information (12 CFR Part 261), all applications made, including any documents and other material submitted in support of the applications, will be made available for public inspection and copying. A copy of the application also will be made available at the Federal Reserve Bank of each district in which the applicant is situated.
Favorable Determination

     If the Board determines on the basis of the information before it that an exemption should be granted, notice of the exemption will be published in the Federal Register, and a copy furnished to the applicant and to each Federal official responsible for administrative enforcement.
     The appropriate State official shall inform the Board within 30 days of any change in its relevant law or regulations. The official shall file with the Board such periodic reports as the Board may require.
     The Board will inform the appropriate State official of any subsequent amendments to the Federal law, regulation, interpretations, or enforcement policies that might require an amendment to State law, regulation, interpretations, or enforcement procedures.

Adverse Determination

     If the Board makes an initial determination that an exemption should not be granted, the Board will afford the applicant a reasonable opportunity to demonstrate further that an exemption is proper. If the Board ultimately finds that an exemption should not be granted, notice of an adverse determination will be published in the Federal Register and a copy furnished to the applicant.

Revocation of Exemption

     The Board reserves the right to revoke an exemption if at any time it determines that the standards required for an exemption are not met.
     Before taking such action, the Board will notify the appropriate State official of its intent, and will afford the official such opportunity as it deems appropriate in the circumstances to demonstrate that revocation is improper. If the Board ultimately finds that revocation is proper, notice of the Board's intention to revoke such exemption will be published in the Federal Register with a reasonable period of time for interested persons to comment.
     Notice of revocation of an exemption will be published in the Federal Register. A copy of such notice will be furnished to the appropriate State official and to the Federal officials responsible for enforcement. Upon revocation of an exemption, creditors in that State shall then be subject to the requirements of the Federal law.
 

Appendix C--Issuance of Staff Interpretations
 

Official Staff Interpretations

     Officials in the Board's Division of Consumer and Community Affairs are authorized to issue official staff interpretations of this regulation. These interpretations provide the protection afforded under section 130(f) of the Act. Except in unusual circumstances, such interpretations will not be issued separately but will be incorporated in an official commentary to the regulation which will be amended periodically.

Requests for Issuance of Official Staff Interpretations

A request for an official staff interpretation shall be in writing and addressed to the Director, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, Washington, DC 20551. The request shall contain a complete statement of all relevant facts concerning the issue, including copies of all pertinent documents.

Scope of Interpretations

No staff interpretations will be issued approving creditors' forms, statements, or calculation tools or methods. This restriction does not apply to forms, statements, tools, or methods whose use is required or sanctioned by a government agency.
 

Appendix D--Multiple Advance Construction Loans

Section 226.17(c)(6) permits creditors to treat multiple advance loans to finance construction of a dwelling that may be permanently financed by the same creditor either as a single transaction or as more than one transaction. If the actual schedule of advances is not known, the following methods may be used to estimate the interest portion of the finance charge and the annual percentage rate and to make disclosures. If the creditor chooses to disclose the construction phase separately, whether interest is payable periodically or at the end of construction, part I may be used. If the creditor chooses to disclose the construction and the permanent financing as one transaction, part II may be used.
Part I--Construction Period Disclosed Separately

     A. If interest is payable only on the amount actually advanced for the time it is outstanding:
     1. Estimated interest--Assume that one-half of the commitment amount is outstanding at the contract interest rate for the entire construction period.
     2. Estimated annual percentage rate--Assume a single payment loan that matures at the end of the construction period. The finance charge is the sum of the estimated interest and any prepaid finance charge. The amount financed for computation purposes is determined by subtracting any prepaid finance charge from one-half of the commitment amount.
     3. Repayment schedule--The number and amounts of any interest payments may be omitted in disclosing the payment schedule under Sec. 226.18(g). The fact that interest payments are required and the timing of such payments shall be disclosed.
     4. Amount financed--The amount financed for disclosure purposes is the entire commitment amount less any prepaid finance charge.
     B. If interest is payable on the entire commitment amount without regard to the dates or amounts of actual disbursement:
     1. Estimated interest--Assume that the entire commitment amount is outstanding at the contract interest rate for the entire construction period.
     2. Estimated annual percentage rate--Assume a single payment loan that matures at the end of the construction period. The finance charge is the sum of the estimated interest and any prepaid finance charge. The amount financed for computation purposes is determined by subtracting any prepaid finance charge from one-half of the commitment amount.
     3. Repayment schedule--Interest payments shall be disclosed in making the repayment schedule disclosure under Sec. 226.18(g).
 

Appendix E--Rules For Card Issuers That Bill on a Transaction-By- Transaction Basis

     The following provisions of Subpart B apply if credit cards are issued and (1) the card issuer and the seller are the same or related persons; (2) no finance charge is imposed; (3) consumers are billed in full for each use of the card on a transaction-by-transaction basis, by means of an invoice or other statement reflecting each use of the card; and (4) no cumulative account is maintained which reflects the transactions by each consumer during a period of time, such as a month:
     Section 226.6(d), and, as applicable, Sec. 226.6(b) and (c). The disclosure required by Sec. 226.6(b) shall be limited to those charges that are or may be imposed as a result of the deferral of payment by use of the card, such as late payment or delinquency charges.
     Section 226.7(b) and Sec. 226.7(k). Creditors may comply by placing the required disclosures on the invoice or statement sent to the consumer for each transaction.
     Section 226.9(a). Creditors may comply by mailing or delivering the statement required by Sec. 226.6(d) (See appendix G-3) to each consumer receiving a transaction invoice during a one-month period chosen by the card issuer or by sending either the statement prescribed by Sec. 226.6(d) or an alternative billing error rights statement substantially similar to that in appendix G-4, with each invoice sent to a consumer.
     Section 226.9(c).
     Section 226.10.
     Section 226.11. This section applies when a card issuer receives a payment or other credit that exceeds by more than $1 the amount due, as shown on the transaction invoice. The requirement to credit amounts to an account may be complied with by other reasonable means, such as by a credit memorandum. Since no periodic statement is provided, a notice of the credit balance shall be sent to the consumer within a reasonable period of time following its occurrence unless a refund of the credit balance is mailed or delivered to the consumer within 7 business days of its receipt by the card issuer.
     Section 226.12 including Sec. 226.12(c) and (d), as applicable. Section 226.12(e) is inapplicable.
     Section 226.13, as applicable. All references to periodic statement shall be read to indicate the invoice or other statement for the relevant transaction. All actions with regard to correcting and adjusting a consumer's account may be taken by issuing a refund or a new invoice, or by other appropriate means consistent with the purposes of the section.
     Section 226.15, as applicable.
 

Appendix F--Annual Percentage Rate Computations for Certain Open-End Credit Plans

     In determining the denominator of the fraction under Sec. 226.14(c)(3), no amount will be used more than once when adding the sum of the balances ¹ subject to periodic rates to the sum of the amounts subject to specific transaction charges. In every case, the full amount of transactions subject to specific transaction charges shall be included in the denominator. Other balances or parts of balances shall be included according to the manner of determining the balance subject to a periodic rate, as illustrated in the following examples of accounts on monthly billing cycles:
 

     1 Where a portion of the finance charge is determined by application of one or more daily periodic rates, the phrase sum of the balances shall also mean the average of daily balances.

     1. Previous balance--none.
     A specific transaction of $100 occurs on the first day of the billing cycle. The average daily balance is $100. A specific transaction charge of 3% is applicable to the specific transaction. The periodic rate is 1\1/2\% applicable to the average daily balance. The numerator is the amount of the finance charge, which is $4.50. The denominator is the amount of the transaction (which is $100), plus the amount by which the balance subject to the periodic rate exceeds the amount of the specific transactions (such excess in this case is 0), totaling $100.
     The annual percentage rate is the quotient (which is 4\1/2\%) multiplied by 12 (the number of months in a year), i.e., 54%.
     2. Previous balance--$100.
     A specific transaction of $100 occurs at the midpoint of the billing cycle. The average daily balance is $150. A specific transaction charge of 3% is applicable to the specific transaction. The periodic rate is 1\1/2\% applicable to the average daily balance. The numerator is the amount of the finance charge which is $5.25. The denominator is the amount of the transaction (which is $100), plus the amount by which the balance subject to the periodic rate exceeds the amount of the specific transaction (such excess in this case is $50), totaling $150. As explained in example 1, the annual percentage rate is 3\1/2\% x 12=42%.
     3. If, in example 2, the periodic rate applies only to the previous balance, the numerator is $4.50 and the denominator is $200 (the amount of the transaction, $100, plus the balance subject only to the periodic rate, the $100 previous balance). As explained in example 1, the annual percentage rate is 2\1/4\% x 12=27%.
     4. If, in example 2, the periodic rate applies only to an adjusted balance (previous balance less payments and credits) and the consumer made a payment of $50 at the midpoint of the billing cycle, the numerator is $3.75 and the denominator is $150 (the amount of the transaction, $100, plus the balance subject to the periodic rate, the $50 adjusted balance). As explained in example 1, the annual percentage rate is 2\1/2\% x 12=30%.
     5. Previous balance--$100.
     A specific transaction (check) of $100 occurs at the midpoint of the billing cycle. The average daily balance is $150. The specific transaction charge is $.25 per check. The periodic rate is 1\1/2\% applied to the average daily balance. The numerator is the amount of the finance charge, which is $2.50 and includes the $.25 check charge and the $2.25 resulting from the application of the periodic rate. The denominator is the full amount of the specific transaction (which is $100) plus the amount by which the average daily balance exceeds the amount of the specific transaction (which in this case is $50), totaling $150. As explained in example 1, the annual percentage rate would be 1\2/3\% x 12=20%.
     6. Previous balance--none.
     A specific transaction of $100 occurs at the midpoint of the billing cycle. The average daily balance is $50. The specific transaction charge is 3% of the transaction amount or $3.00. The periodic rate is 1\1/2\% per month applied to the average daily balance. The numerator is the amount of the finance charge, which is $3.75, including the $3.00 transaction charge and $.75 resulting from application of the periodic rate. The denominator is the full amount of the specific transaction ($100) plus the amount by which the balance subject to the periodic rate exceeds the amount of the transaction ($0). Where the specific transaction amount exceeds the balance subject to the periodic rate, the resulting number is considered to be zero rather than a negative number ($50-$100=-$50). The denominator, in this case, is $100. As explained in example 1, the annual percentage rate is 3\3/4\% x 12=45%.

Appendix G--Open-End Model Forms and Clauses

G-1--Balance Computation Methods Model Clauses (§§226.6 and 226.7)
G-2--Liability for Unauthorized Use Model Clause (§226.12)
G-3--Long Form Billing Error Rights Model Form (§§226.6 and 226.9)
G-4--Alternative Billing Error Rights Model Form (§226.9)
G-5--Rescission Model Form (When Opening an Account) (§226.15)
G-6--Rescission Model Form (For Each Transaction) (§226.15)
G-7--Rescission Model Form (When Increasing the Credit Limit) (§226.15)
G-8--Rescission Model Form (When Adding a Security Interest) (§226.15)
G-9--Rescission Model Form (When Increasing the Security) (§226.15)
G-10(A)-(B)--Application and Solicitations Model Forms (Credit Cards) (§226.5a(b))
G-10(C)--Applications and Solicitations Model Form (Credit Cards) (§226.5a(b)){{6-30-89 p.6676.01}}
G-11--Applications and Solicitations Made Available to General Public Model Clauses (§226.5a(e))
G-12--Charge Card Model Clause (When Access to Plan Offered by Another (§226.9(f))
G-13(A)--Change in Insurance Provider Model Form (Combined Notice) (§226.9(f)(2))
G-14A--Home Equity Sample
G-14B--Home Equity Sample
G-14C--Home Equity Sample (Repayment phase disclosed later)
G-15--Home Equity Model Clauses

G-1--BALANCE COMPUTATION METHODS MODEL CLAUSES
(a) Adjusted balance method
We figure [a portion of] the finance charge on your account by applying the periodic rate to the "adjusted balance" of your account. We get the "adjusted balance" by taking the balnace you owed at the end of the previous billing cycle and subtracting [any unpaid finance charges and] any payments and credits received during the present billing cycle.

(b) Previous balance method
We figure [a portion of] the finance charge on your account by applying the periodic rate to the amount you owe at the beginning of each billing cycle [minus any unpaid finance charges.] We do not subtract any payments or credits received during the billing cycle. [The amount of payments and credits to your account this billing cycle was $_________.]

(c) Average daily balance method (excluding current transactions)
We figure [a portion of] the finance charge on your account by applying the periodic rate to the "average daily balance" of your account (excluding current transactions). To get the "average daily balance" we take the beginning balance of your account each day and subtract any payments or credits [and any unpaid finance charges]. We do not add in any new [purchases/advances/loans]. This gives us the daily balance. Then, we add all the daily balances for the billing cycle together and divide the total by the number of days in the billing cycle. This gives us the "average daily balance."

(d) Average daily balance method (including current transactions)
We figure [a portion of] the finance charge on your account by applying the periodic rate to the "average daily balance" of your account (including current transactions). To get the "average daily balance" we take the beginning balance of your account each day, add any new [purchases/advances/loans], and sbutract any payments or credits, [and unpaid fiance charges]. This gives us the daily blance. Then, we add up all the daily balances for the billing cycle and divide the total by the number of days in the billing cycle. This gives us the "average daily balance."

(e) Ending balance method
We figure [a portion of] the finance charge on your account by applying the periodic rate to the amount you owe at the end of each cycle (including new purchases and deducting payments and credits made during the billing cycle).

G-2--LIABILITY FOR UNAUTHORIZED USE MODEL CLAUSE
You may be liable for the unauthorized use of your credit card [or other term that describes the credit card.] You will not be liable for unauthorized use that occurs after you notify [name of card issuer or its designee] at [address], orally or in writing, of the loss, theft, or possible unauthorized use. In any case, your liability will not exceed [insert $50 or any lesser amount under agreement with the cardholder.] {{6-30-89 p.6676.02}}

G-3--LONG FORM BILLING ERROR RIGHTS MODEL FORM
YOUR BILLING RIGHTS KEEP THIS NOTICE FOR FUTURE USE
This notice contains important information about your rights and our responsibilities under the Fair Credit Billing Act.

Notify Us In Case of Errors or Questions About Your Bill
If you think your bill is wrong, or if you need more information about a transaction on your bill, write us [on a separate sheet] at [address] [the address listed on your bill]. Write to us as soon as possible. We must hear from you no later than 60 days after we sent you the first bill on which the error or problem appeared. You can telephone us, but doing so will not preserve your rights.

In your letter, give us the following information:

• Your name and account number.
• The dollar amount of the suspected error.
• Describe the error and explain, if you can, why you believe there is an error. If you need more information, describe the item you are not sure about.

• Your name and account number.
• The dollar amount of the suspected error.
• Describe the error and explain, if you can, why you believe there is an error. If you need more information, describe the item you are unsure about.

• The elimination of a type of coverage previously provided to you. [(explanation)] [See __of the attached policy for details.]
  
  
• A lowering of the age at which your coverage will terminate or will become more restrictive. [(explanation)] [See __of the attached policy or certificate for details.]
• A decrease in your maximum insurable loan balance, maximum periodic benefit payment, maximum number of payments, or any other decrease in the dollar amount {{6-30-89 p.6678.04}} of your coverage or benefits. [(explanation)] [See __of the attached policy or certificate for details.]
  
  
• A restriction on the eligibility for benefits for you or others. [(explanation)] [See __of the attached policy or certificate for details.]
  
  
• A restriction in the definition of "disability" or other key term of coverage. [(explanation)] [See__of the attached policy or certificate for details.]
  
  
• The addition of exclusions or limitations that are broader or other than those under the current coverage. [(explanation)] [See __of the attached policy or certificate for details.]
  
  
• An increase in the elimination (waiting) period or a change to nonretroactive coverage. [(explanation)] [See__of the attached policy or certificate for details).]
  
  

• Application fee: $150 (due at application)
• Points: 1% of credit limit (due when account opened)
• Annual maintenance fee: $75 (due each year)

• You engage in fraud or material misrepresentation in connection with the line.
• You do not meet the repayment terms.
• Your action or inaction adversely affects the collateral or our rights in the collateral.

• The value of the dwelling securing the line declines significantly below its appraised value for purposes of the line.
• We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances.
• You are in default of a material obligation in the agreement.
• Government action prevents us from imposing the annual percentage rate provided for or impairs our security interest such that the value of the interest is less than 120 percent of the credit line.
• A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.
• The maximum annual percentage rate is reached.

• Monthly interest-only payments. Under this option, your payments will be due {{6-30-89 p.6678.07}} monthly and will equal the finance charges that accrued on the outstanding balance during the preceding month.
• Quarterly interest-only payments. Under this option, your payments will be due quarterly and will equal the finance charges that accrued on the outstanding balance during the preceding quarter.
• 2% of the balance. Under this option, your payments will be due monthly and will equal 2% of the outstanding balance on your line plus finance charges that accrued on the outstanding balance during the preceding month.

• Under the monthly interest-only payment option, it would take 18 years and 1 month to pay off the advance if you made only the minimum payments. During that period, you would make 120 payments of $79.33, followed by 96 payments varying between $379.33 and $50 and one final payment of $10.75.
• Under the 2% of the balance payment option, it would take 10 years and 8 months to pay off the advance if you made only the mininum payments. During that period, you would make 120 payments varying between $279.33 and $50, followed by 7 payments of $50 and one final payment of $21.53.

• Application fee: $100 (due at application)
• Points: 1% of credit limit (due when account opened)
• Annual maintenance fee: $50 during the first 3 years, $75 thereafter (due each year)

• Under the monthly interest-only payment option, the minimum monthly payment would be $150.
• Under the 2% of the balance payment option, the minimum monthly payment would be $350.

• You engage in fraud or material misrepresentation in connection with the line.
• You do not meet the repayment terms.
• Your action or inaction adversely affects the collateral or our rights in the collateral.

• The value of the dwelling securing the line declines significantly below its appraised value for purposes of the line.
• We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances.
• You are in default of a material obligation in the agreement.
• Government action prevents us from imposing the annual percentage rate provided for or impairs our security interest such that the value of the interest is less than 120 percent of the credit line.
• A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.
• The maximum annual percentage rate is reached.

Appendix H to Part 226--Closed-End Model Forms And Clauses

H--1--Credit Sale Model Form (§ 226.18)
H--2--Loan Model Form (§ 226.18)
H--3--Amount Financed Itemization Model Form (§ 226.18(c))
H--4(A)--Variable-Rate Model Clauses (§ 226.18(f)(1))
H--4(B)--Variable-Rate Model Clauses (§ 226.18(f)(2))
H--4(C)--Variable-Rate Model Clauses (§ 226.19(b))
H--4(D)--Variable-Rate Model Clauses (§ 226.20(c))
H--5--Demand Feature Model Clauses (§ 226.18(I))
H--6--Assumption Policy Model Clause (§ 226.18(q))
H--7--Required Deposit Model Clause (§ 226.18(r))
H--8--Rescission Model Form (General) (§ 226.23)
H--9--Rescission Model Form (Refinancing with Original Creditor) (§ 226.23)
H--10--Credit Sale Sample
H--11--Installment Loan Sample
H--12--Refinancing Sample
H--13--Mortgage with Demand Feature Sample
H--14--Variable Rate Mortgage Sample (§ 226.19(b))
H--15--Graduated Payment Mortgage Sample
H--16--Mortgage Sample (§ 226.32)

H-1--CREDIT SALE MODEL FORM

View Form

H--2--LOAN MODEL FORM

View Form

H--3--AMOUNT FINANCED ITEMIZATION MODEL FORM

Itemization of the Amount Financed of $ __________________
$ ____________ Amount given to you directly
$ ____________ Amount paid on your account

Amount paid to others on your behalf
$ ____________ to [public officials] [credit bureau] [appraiser] [insurance company]
$ ____________ to [name of another creditor]
$ ____________ to (other)
$ ____________ Prepaid finance charge


H--4(A)--VARIABLE RATE MODEL CLAUSES

The annual percentage rate may increase during the term of this transaction if:
[the prime interest rate of (creditor) increases.]
[the balance in your deposit account falls below $________.]
[you terminate your employment with (employer) .]

[The interest rate will not increase above ____ %.]
[The maximum interest rate increase at one time will be ____%.]
[The rate will not increase more than once every (time period) .]

Any increase will take the form of:
[higher payment amounts.]
[more payments of the same amount.]
[a larger amount due at maturity.]

Example based on the specific transaction
[If the interest rate increases by ____% in (time period),
[your regular payments will increase to $ ________ .]
[you will have to make ___additional payments.]
[your final payment will increase to $ ________ .]]

Example based on a typical transaction
[If your loan were for $ ________at ____% for (term) and the rate increased to ____% in (time period),
[your regular payments would increase by $ ________ .]
[you would have to make ___additional payments.]
[your final payment would increase by $ ________ .]]

H--4(B) VARIABLE-RATE MODEL CLAUSES

Your loan contains a variable-rate feature. Disclosures about the variable-rate feature have been provided to you earlier.

H--4(C) VARIABLE-RATE MODEL CLAUSES

This disclosure describes the features of the Adjustable Rate Mortgage (ARM) program you are considering. Information on other ARM programs is available upon request.

How Your Interest Rate and Payment are Determined

• Your interest rate will be based on [an index plus a margin] [a formula].
• Your payment will be based on the interest rate, loan balance, and loan term.

• Your interest rate can change (frequency).
• [Your interest rate cannot increase or decrease more than ___percentage points at each adjustement.]
• Your interest rate cannot increase [or decrease] more than ___percentage points over the term of the loan.

• Your payment can change (frequency) based on changes in the interest rate.
• [Your payment cannot increase more than (amount of percentage) at each adjustment.]
• You will be notified in writing ___days before the due date of a payment at a new level. This notice will contain information about your interest rates, payment amount, and loan balance.
• [You will be notified once each year during which interest rate adjustments, but no payment adjustments, have been made to your loan. This notice will contain information about your interest rates, payment amount, and loan balance.]
• [For example, on a $10,000 [term] loan with an initial interest rate of ___[(the rate shown in the interest rate column below for the year 19___)] [(in effect (month) (year)], the maximum amount that the interest rate can rise under this program is ___percentage points, to ___%, and the monthly payment can rise from a first-year payment of $___ to a maximum of $___ in the ___year. To see what your payments would be, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be: $60,000 + $10,000 = 6; 6 x ___= $___ per month.)]

• Your interest rate will be based on an index rate plus a margin.
• Your payment will be based on the interest rate, loan balance, and loan term.

• Your interest rate will equal the index rate plus our margin unless your interest rate "caps" limit the amount of change in the interest rate.

• Your interest rate can change yearly.
• Your interest rate cannot increase or decrease more than 2 percentage points per year.
• Your interest rate cannot increase or decrease more than 5 percentage points over the term of the loan.

• Your monthly payment can increase or decrease substantially based on annual changes in the interest rate.
• [For example, on a $10,000, 30-year loan with an initial interest rate of 12.41 percent in effect in July 1996, the maximum amount that the interest rate can rise under this program is 5 percentage points, to 17.41 percent, and the monthly payment can rise from a first-year payment of $106.03 to a maximum of $145.34 in the fourth year. To see what your payment is, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be: $60,000$10,000=6; 6106.03=$636.18 per month.)
• You will be notified in writing 25 days before the annual payment adjustment may be made. This notice will contain information about your interest rates, payment amount and loan balance.] Example The example below shows how your payments would have changed under this ARM program based on actual changes in the index from 1982 to 1996. This does not necessarily indicate how your index will change in the future. The example is based on the following assumptions:

Appendix I--Federal Enforcement Agencies

     The following list indicates which federal agency enforces Regulation Z for particular classes of businesses. Any questions concerning compliance by a particular business should be directed to the appropriate enforcement agency. Terms that are not defined in the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in the International Banking Act of 1978 (12 U.S.C. 3101).
National banks and federal branches and federal agencies of foreign banks

District office of the Office of the Comptroller of the Currency for the district in which the institution is located.

State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act

Federal Reserve Bank serving the district in which the institution is located.

Non-member insured banks and insured state branches of foreign banks

Federal Deposit Insurance Corporation Regional director for the region in which the institution is located.

Savings institutions insured under the Savings Association Insurance Fund of the FDIC and federally chartered savings banks insured under the Bank Insurance Fund of the FDIC (but not including state-chartered savings banks insured under the Bank Insurance Fund).

     Office of Thrift Supervision Regional Director for the region in which the institution is located.
 

Federal Credit Unions

     Regional office of the National Credit Union Administration serving the area in which the Federal credit union is located.
 

Air Carriers

     Assistant General Counsel for Aviation Enforcement and Proceedings, Department of Transportation, 400 Seventh Street, SW., Washington, DC 20590.

Creditors Subject to Packers and Stockyards Act

     Nearest Packers and Stockyards Administration area supervisor.

Federal Land Banks, Federal Land Bank Associations, Federal Intermediate Credit Banks and Production Credit Associations.

     Farm Credit Administration, 490 L'Enfant Plaza, SW., Washington, DC 20578.

     Retail, Department Stores, Consumer Finance Companies, All Other Creditors, and All Nonbank Credit Card Issuers (Creditors operating on a local or regional basis should use the address of the FTC Regional Office in which they operate.)

     Division of Credit Practices, Bureau of Consumer Protection, Federal Trade Commission, Washington, DC 20580.
 

Appendix J--Annual Percentage Rate Computations for Closed-End Credit Transactions
 

     (a) Introduction

     (1) Section 226.22(a) of Regulation Z provides that the annual percentage rate for other than open end credit transactions shall be determined in accordance with either the actuarial method or the United States Rule method. This appendix contains an explanation of the actuarial method as well as equations, instructions and examples of how this method applies to single advance and multiple advance transactions.
     (2) Under the actuarial method, at the end of each unit-period (or fractional unit-period) the unpaid balance of the amount financed is increased by the finance charge earned during that period and is decreased by the total payment (if any) made at the end of that period. The determination of unit-periods and fractional unit-periods shall be consistent with the definitions and rules in paragraphs (b) (3), (4) and (5) of this section and the general equation in paragraph (b)(8) of this section.
     (3) In contrast, under the United States Rule method, at the end of each payment period, the unpaid balance of the amount financed is increased by the finance charge earned during that payment period and is decreased by the payment made at the end of that payment period. If the payment is less than the finance charge earned, the adjustment of the unpaid balance of the amount financed is postponed until the end of the next payment period. If at that time the sum of the two payments is still less than the total earned finance charge for the two payment periods, the adjustment of the unpaid balance of the amount financed is postponed still another payment period, and so forth.
     (b) Instructions and Equations for the Actuarial Method

          (1) General Rule

     The annual percentage rate shall be the nominal annual percentage rate determined by multiplying the unit-period rate by the number of unit-periods in a year.

          (2) Term of the Transaction

The term of the transaction begins on the date of its consummation, except that if the finance charge or any portion of it is earned beginning on a later date, the term begins on the later date. The term ends on the date the last payment is due, except that if an advance is scheduled after that date, the term ends on the later date. For computation purposes, the length of the term shall be equal to the time interval between any point in time on the beginning date to the same point in time on the ending date.

          (3) Definitions of Time Intervals
 

     (i) A period is the interval of time between advances or between payments and includes the interval of time between the date the finance charge begins to be earned and the date of the first advance thereafter or the date of the first payment thereafter, as applicable.
     (ii) A common period is any period that occurs more than once in a transaction.
     (iii) A standard interval of time is a day, week, semimonth, month, or a multiple of a week or a month up to, but not exceeding, 1 year.
     (iv) All months shall be considered equal. Full months shall be measured from any point in time on a given date of a given month to the same point in time on the same date of another month. If a series of payments (or advances) is scheduled for the last day of each month, months shall be measured from the last day of the given month to the last day of another month. If payments (or advances) are scheduled for the 29th or 30th of each month, the last day of February shall be used when applicable.

          (4) Unit-period

     (i) In all transactions other than a single advance, single payment transaction, the unit-period shall be that common period, not to exceed 1 year, that occurs most frequently in the transaction, except that
     (A) If 2 or more common periods occur with equal frequency, the smaller of such common periods shall be the unit-period; or
     (B) If there is no common period in the transaction, the unit-period shall be that period which is the average of all periods rounded to the nearest whole standard interval of time. If the average is equally near 2 standard intervals of time, the lower shall be the unit-period.
     (ii) In a single advance, single payment transaction, the unit- period shall be the term of the transaction, but shall not exceed 1 year.

          (5) Number of Unit-periods Between 2 Given Dates

     (i) The number of days between 2 dates shall be the number of 24- hour intervals between any point in time on the first date to the same point in time on the second date.
     (ii) If the unit-period is a month, the number of full unit-periods between 2 dates shall be the number of months measured back from the later date. The remaining fraction of a unit-period shall be the number of days measured forward from the earlier date to the beginning of the first full unit-period, divided by 30. If the unit-period is a month, there are 12 unit-periods per year.
     (iii) If the unit-period is a semimonth or a multiple of a month not exceeding 11 months, the number of days between 2 dates shall be 30 times the number of full months measured back from the later date, plus the number of remaining days. The number of full unit-periods and the remaining fraction of a unit-period shall be determined by dividing such number of days by 15 in the case of a semimonthly unit-period or by the appropriate multiple of 30 in the case of a multimonthly unit-period. If the unit-period is a semimonth, the number of unit-periods per year shall be 24. If the number of unit-periods is a multiple of a month, the number of unit-periods per year shall be 12 divided by the number of months per unit-period.
     (iv) If the unit-period is a day, a week, or a multiple of a week, the number of full unit-periods and the remaining fractions of a unit- period shall be determined by dividing the number of days between the 2 given dates by the number of days per unit-period. If the unit-period is a day, the number of unit-periods per year shall be 365. If the unit- period is a week or a multiple of a week, the number of unit-periods per year shall be 52 divided by the number of weeks per unit-period.
     (v) If the unit-period is a year, the number of full unit-periods between 2 dates shall be the number of full years (each equal to 12 months) measured back from the later date. The remaining fraction of a unit-period shall be
     (A) The remaining number of months divided by 12 if the remaining interval is equal to a whole number of months, or
     (B) The remaining number of days divided by 365 if the remaining interval is not equal to a whole number of months.
     (vi) In a single advance, single payment transaction in which the term is less than a year and is equal to a whole number of months, the number of unit-periods in the term shall be 1, and the number of unit-periods per year shall be 12 divided by the number of months in the term or 365 divided by the number of days in the term.
     (vii) In a single advance, single payment transaction in which the term is less than a year and is not equal to a whole number of months, the number of unit-periods in the term shall be 1, and the number of unit-periods per year shall be 365 divided by the number of days in the term.

          (6) Percentage Rate for a Fraction of a Unit-period

    The percentage rate of finance charge for a fraction (less than 1) of a unit-period shall be equal to such fraction multiplied by the percentage rate of finance charge per unit-period.
 

Appendix K to Part 226--Total Annual Loan Cost Rate Computations for Reverse Mortgage Transactions

     (a) Introduction. Creditors are required to disclose a series of total annual loan cost rates for each reverse mortgage transaction. This appendix contains the equations creditors must use in computing the total annual loan cost rate for various transactions, as well as instructions, explanations, and examples for various transactions. This appendix is modeled after Appendix J of this part (Annual Percentage Rates Computations for Closed-end Credit Transactions); creditors should consult Appendix J of this part for additional guidance in using the formulas for reverse mortgages.
     (b) Instructions and equations for the total annual loan cost rate.
     (1) General rule. The total annual loan cost rate shall be the nominal total annual loan cost rate determined by multiplying the unit- period rate by the number of unit-periods in a year.
     (2) Term of the transaction. For purposes of total annual loan cost disclosures, the term of a reverse mortgage transaction is assumed to begin on the first of the month in which consummation is expected to occur. If a loan cost or any portion of a loan cost is initially incurred beginning on a date later than consummation, the term of the transaction is assumed to begin on the first of the month in which that loan cost is incurred. For purposes of total annual loan cost disclosures, the term ends on each of the assumed loan periods specified in Sec. 226.33(c)(6).
     (3) Definitions of time intervals.
     (i) A period is the interval of time between advances.
     (ii) A common period is any period that occurs more than once in a transaction.
     (iii) A standard interval of time is a day, week, semimonth, month, or a multiple of a week or a month up to, but not exceeding, 1 year.
     (iv) All months shall be considered to have an equal number of days.
     (4) Unit-period.
     (i) In all transactions other than single-advance, single-payment transactions, the unit-period shall be that common period, not to exceed one year, that occurs most frequently in the transaction, except that:
     (A) If two or more common periods occur with equal frequency, the smaller of such common periods shall be the unit-period; or
     (B) If there is no common period in the transaction, the unit-period shall be that period which is the average of all periods rounded to the nearest whole standard interval of time. If the average is equally near two standard intervals of time, the lower shall be the unit-period.
     (ii) In a single-advance, single-payment transaction, the unit- period shall be the term of the transaction, but shall not exceed one year.
     (5) Number of unit-periods between two given dates.
     (i) The number of days between two dates shall be the number of 24- hour intervals between any point in time on the first date to the same point in time on the second date.
     (ii) If the unit-period is a month, the number of full unit-periods between two dates shall be the number of months. If the unit-period is a month, the number of unit-periods per year shall be 12.
     (iii) If the unit-period is a semimonth or a multiple of a month not exceeding 11 months, the number of days between two dates shall be 30 times the number of full months. The number of full unit-periods shall be determined by dividing the number of days by 15 in the case of a semimonthly unit-period or by the appropriate multiple of 30 in the case of a multimonthly unit-period. If the unit-period is a semimonth, the number of unit-periods per year shall be 24. If the number of unit- periods is a multiple of a month, the number of unit-periods per year shall be 12 divided by the number of months per unit-period.
     (iv) If the unit-period is a day, a week, or a multiple of a week, the number of full unit-periods shall be determined by dividing the number of days between the two given dates by the number of days per unit-period. If the unit-period is a day, the number of unit-periods per year shall be 365. If the unit-period is a week or a multiple of a week, the number of unit-periods per year shall be 52 divided by the number of weeks per unit-period.
     (v) If the unit-period is a year, the number of full unit-periods between two dates shall be the number of full years (each equal to 12 months).
     (6) Symbols. The symbols used to express the terms of a transaction in the equation set forth in paragraph (b)(8) of this appendix are defined as follows:

A(INF)j=The amount of each periodic or lump-sum advance to the consumer
          under the reverse mortgage transaction.
i=Percentage rate of the total annual loan cost per unit-period,
          expressed as a decimal equivalent.
j=The number of unit-periods until the jth advance.
n=The number of unit-periods between consummation and repayment of the
          debt.
P(INF)n=Min (Bal(INF)n, Val(INF)n). This is the maximum amount that the
          creditor can be repaid at the specified loan term.
Bal(INF)n=Loan balance at time of repayment, including all costs and
          fees incurred by the consumer (including any shared
          appreciation or shared equity amount) compounded to time n at
          the creditor's contract rate of interest.
Val(INF)n=Val(INF)0 (1 + [greek-s])^y, where Val(INF)0 is the
          property value at consummation, [greek-s] is the assumed
          annual rate of appreciation for the dwelling, and y is the
          number of years in the assumed term. Val(INF)n must be reduced
          by the amount of any equity reserved for the consumer by
          agreement between the parties, or by 7 percent (or the amount
          or percentage specified in the credit agreement), if the
          amount required to be repaid is limited to the net proceeds of
          sale.
[greek-S]=The summation operator.

w=The number of unit-periods per year.
I=wi x 100=the nominal total annual loan cost rate.

     (7) General equation. The total annual loan cost rate for a reverse mortgage transaction must be determined by first solving the following formula, which sets forth the relationship between the advances to the consumer and the amount owed to the creditor under the terms of the reverse mortgage agreement for the loan cost rate per unit-period (the loan cost rate per unit-period is then multiplied by the number of unit- periods per year to obtain the total annual loan cost rate I; that is, I = wi):
     (8) Solution of general equation by iteration process. (i) The general equation in paragraph (b)(7) of this appendix, when applied to a simple transaction for a reverse mortgage loan of equal monthly advances of $350 each, and with a total amount owed of $14,313.08 at an assumed repayment period of two years, takes the special form: Using the iteration procedures found in steps 1 through 4 of (b)(9)(i) of Appendix J of this part, the total annual loan cost rate, correct to two decimals, is 48.53%.
     (ii) In using these iteration procedures, it is expected that calculators or computers will be programmed to carry all available decimals throughout the calculation and that enough iterations will be performed to make virtually certain that the total annual loan cost rate obtained, when rounded to two decimals, is correct. Total annual loan cost rates in the examples below were obtained by using a 10-digit programmable calculator and the iteration procedure described in Appendix J of this part.
     (9) Assumption for discretionary cash advances. If the consumer controls the timing of advances made after consummation (such as in a credit line arrangement), the creditor must use the general formula in paragraph (b)(7) of this appendix. The total annual loan cost rate shall be based on the assumption that 50 percent of the principal loan amount is advanced at closing, or in the case of an open-end transaction, at the time the consumer becomes obligated under the plan. Creditors shall assume the advances are made at the interest rate then in effect and that no further advances are made to, or repayments made by, the consumer during the term of the transaction or plan.
     (10) Assumption for variable-rate reverse mortgage transactions. If the interest rate for a reverse mortgage transaction may increase during the loan term and the amount or timing is not known at consummation, creditors shall base the disclosures on the initial interest rate in effect at the time the disclosures are provided.
     (11) Assumption for closing costs. In calculating the total annual loan cost rate, creditors shall assume all closing and other consumer costs are financed by the creditor.
     (c) Examples of total annual loan cost rate computations.
     (1) Lump-sum advance at consummation.

Lump-sum advance to consumer at consummation: $30,000
Total of consumer's loan costs financed at consummation: $4,500
Contract interest rate: 11.60%
Estimated time of repayment (based on life expectancy of a consumer at
     age 78): 10 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 4%
P(INF)10 = Min (103,385.84, 137,662.72)
i = .1317069438
Total annual loan cost rate (100(.1317069438 x 1)) = 13.17%

     (2) Monthly advance beginning at consummation.

Monthly advance to consumer, beginning at consummation: $492.51
Total of consumer's loan costs financed at consummation: $4,500
Contract interest rate: 9.00%
Estimated time of repayment (based on life expectancy of a consumer at
          age 78): 10 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 8%
[GRAPHIC] [TIFF OMITTED] TR24MR95.011

Total annual loan cost rate (100(.009061140 x 12))=10.87%
     (3) Lump sum advance at consummation and monthly advances thereafter.
Lump sum advance to consumer at consummation: $10,000
Monthly advance to consumer, beginning at consummation: $725
Total of consumer's loan costs financed at consummation: $4,500
Contract rate of interest: 8.5%
Estimated time of repayment (based on life expectancy of a consumer at
          age 75): 12 years
Appraised value of dwelling at consummation: $100,000
Assumed annual dwelling appreciation rate: 8%
[GRAPHIC] [TIFF OMITTED] TR24MR95.012

Total annual loan cost rate (100(.007708844 x 12)) = 9.25%

     (d) Reverse mortgage model form and sample form.
     (1) Model form.

                       Total Annual Loan Cost Rate


                               Loan Terms


Age of youngest borrower:

Appraised property value:

Interest rate:

Monthly advance:

Initial draw:

Line of credit:


                          Initial Loan Charges


Closing costs:

Mortgage insurance premium:

Annuity cost:


                          Monthly Loan Charges


Servicing fee:


                            Other Charges:


Mortgage insurance:

Shared Appreciation:


                            Repayment Limits


--------------------------------------------------------------------------------------------


                                                                Total annual loan cost rate           

                                                   -----------------------------------------


                Assumed annual appreciation          2-year loan   [  ]-year    [  ]-year    [  ]-year 
                                                        term      loan term   loan term    loan term 



--------------------------------------------------------------------------------------------


0%......................................                      [  ]                          


4%......................................                      [  ]                          


8%......................................                      [  ]                          


--------------------------------------------------------------------------------------------

 Signing an Application or Receiving These Disclosures Does Not Require 
                        You To Complete This Loan


     (2) Sample Form.




                       Total Annual Loan Cost Rate


                               Loan Terms


Age of youngest borrower: 75

Appraised property value: $100,000

Interest rate: 9%

Monthly advance: $301.80

Initial draw: $1,000

Line of credit: $4,000


                          Initial Loan Charges


Closing costs: $5,000

Mortgage insurance premium: None

Annuity cost: None


                          Monthly Loan Charges


Servicing fee: None



                             Other Charges


Mortgage insurance: None

Shared Appreciation: None


                            Repayment Limits


Net proceeds estimated at 93% of projected home sale



--------------------------------------------------------------------------------------------



                                                                Total annual loan cost rate           

                                                   -----------------------------------------


       Assumed annual appreciation                  2-year loan    [6-year      12-year      17-year
                                                        term      loan term]   loan term    loan term 


--------------------------------------------------------------------------------------------


0%......................................       39.00%     [14.94%]        9.86%        3.87%


4%......................................       39.00%     [14.94%]       11.03%       10.14%


8%......................................       39.00%     [14.94%]       11.03%       10.20%


------------------------------------------------------------------------------------------------------

Signing an Application or Receiving These Disclosures Does Not Require You To Complete This Loan
 

Appendix L to Part 226--Assumed Loan Periods for Computations of Total Annual Loan Cost Rates

     (a) Required tables. In calculating the total annual loan cost rates in accordance with Appendix K of this part, creditors shall assume three loan periods, as determined by the following table.
     (b) Loan periods.
     (1) Loan Period 1 is a two-year loan period.
     (2) Loan Period 2 is the life expectancy in years of the youngest borrower to become obligated on the reverse mortgage loan, as shown in the U.S. Decennial Life Tables for 1979-1981 for females, rounded to the nearest whole year.
     (3) Loan Period 3 is the life expectancy figure in Loan Period 3, multiplied by 1.4 and rounded to the nearest full year (life expectancy figures at .5 have been rounded up to 1).
     (4) At the creditor's option, an additional period may be included, which is the life expectancy figure in Loan Period 2, multiplied by .5 and rounded to the nearest full year (life expectancy figures at .5 have been rounded up to 1).

------------------------------------------------------------------------------------------------------



                                                                                        Loan period             



                                                              Loan period   [Optional     2 (life    Loan period

                  Age of youngest borrower                       1 (in     loan period  expectancy)     3 (in   

                                                                 years)

     (in years)]   (in years)     years)  


------------------------------------------------------------------------------------------------------


62................................................            2         [11]           21           29


63................................................            2         [10]           20           28


64................................................            2         [10]           19           27


65................................................            2          [9]           18           25


66................................................            2          [9]           18           25


67................................................            2          [9]           17           24


68................................................            2          [8]           16           22


69................................................            2          [8]           16           22


70................................................            2          [8]           15           21


71................................................            2          [7]           14           20


72................................................            2          [7]           13           18


73................................................            2          [7]           13           18


74................................................            2          [6]           12           17


75................................................            2          [6]           12           17


76................................................            2          [6]           11           15


77................................................            2          [5]           10           14


78................................................            2          [5]           10           14


79................................................            2          [5]            9           13


80................................................            2          [5]            9           13


81................................................            2          [4]            8           11


82................................................            2          [4]            8           11


83................................................            2          [4]            7           10


84................................................            2          [4]            7           10


85................................................            2          [3]            6            8


86................................................            2          [3]            6            8


87................................................            2          [3]            6            8


88................................................            2          [3]            5            7


89................................................            2          [3]            5            7


90................................................            2          [3]            5            7


91................................................            2          [2]            4            6


92................................................            2          [2]            4            6


93................................................            2          [2]            4            6


94................................................            2          [2]            4            6


95 and over.......................................            2          [2]            3            4


------------------------------------------------------------------------------------------------------

SubPart A - General

SubPart B - Open-End Credit - (Large File - May Load Slowly)

SubPart C - Closed-End Credit

SubPart D - Miscellaneous

Subpart E - Special Rules for Certain Home Mortgage Transactions

Credit And Banking Laws Directory

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