Appendix H - Appendix H to Part 226— Closed-End Model Forms and Clauses
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.
—[The interest rate will be based on (identification of index) plus our margin. Ask for our current interest rate and margin.] —[The interest rate will be based on (identification of formula). Ask us for our current interest rate.] —Information about the index [formula for rate adjustments] is published [can be found] ________________. —[The initial interest rate is not based on the (index) (formula) used to make later adjustments. Ask us for the amount of current interest rate discounts.] How Your Interest Rate Can Change• Your interest rate can change (frequency).
• [Your interest rate cannot increase or decrease more than ______ percentage points at each adjustment.]
• Your interest rate cannot increase [or decrease] more than ______ percentage points over the term of the loan.
How Your Payment Can Change• Your payment can change (frequency) based on changes in the interest rate.
• [Your payment cannot increase more than (amount or 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 × ________ = $________ per month.)]
[ExampleThe 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:
| Amount | $10,000 | Term | __________ | Change date | __________ | Payment adjustment | (frequency) | Interest adjustment | (frequency) | [Margin] * | ________ | Caps ________ [periodic interest rate cap] | ________ [lifetime interest rate cap | ________ [payment cap] | [Interest rate carryover] | [Negative amortization] | [Interest rate discount] ** | Index.......(identification of index or formula) |
* This is a margin we have used recently, your margin may be different.
** This is the amount of a discount we have provided recently; your loan may be discounted by a different amount.]
| Year | Index
(%) | Margin
(Percentage points) | Interest
Rate (%) | Monthly
Payment ($) | Remaining
Balance ($) | 1982 | 1983 | 1984 | 1985 | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 |
|---|
Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: $60,000 ÷ $10,000 = 6; 6 × ________ = $________ per month.)
H-4(I)—Introductory Rate Model Clause
[Introductory Rate Notice
You have a discounted introductory rate of ________ % that ends after (period).
In the (period in sequence), even if market rates do not change, this rate will increase to ____ %.]
H-4(J)—Balloon Payment Model Clause
[Final Balloon Payment due (date): $________]
H-4(K)—“No-Guarantee-to-Refinance” Statement Model Clause
There is no guarantee that you will be able to refinance to lower your rate and payments.
H-9—Rescission Model Form (Refinancing with Original Creditor)
NOTICE OF RIGHT TO CANCEL
Your Right To Cancel
You are entering into a new transaction to increase the amount of credit previously provided to you. Your home is the security for this new transaction. You have a legal right under federal law to cancel this new transaction, without cost, within three business days from whichever of the following events occurs last:
(1) the date of this new transaction, which is ________________; or
(2) the date you received your new Truth in Lending disclosures; or
(3) the date you received this notice of your right to cancel.
If you cancel this new transaction, it will not affect any amount that you presently owe. Your home is the security for that amount. Within 20 calendar days after we receive your notice of cancellation of this new transaction, we must take the steps necessary to reflect the fact that your home does not secure the increase of credit. We must also return any money you have given to us or anyone else in connection with this new transaction.
You may keep any money we have given you in this new transaction until we have done the things mentioned above, but you must then offer to return the money at the address below.
If we do not take possession of the money within 20 calendar days of your offer, you may keep it without further obligation.
How To CancelIf you decide to cancel this new transaction, you may do so by notifying us in writing, at
(Creditor's name and business address).You may use any written statement that is signed and dated by you and states your intention to cancel, or you may use this notice by dating and signing below. Keep one copy of this notice because it contains important information about your rights.
If you cancel by mail or telegram, you must send the notice no later than midnight of
(Date) (or midnight of the third business day following the latest of the three events listed above).If you send or deliver your written notice to cancel some other way, it must be delivered to the above address no later than that time.
I WISH TO CANCEL Consumer's Signature Date
H-14—Variable-Rate Mortgage Sample
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 rate plus a margin.
• Your payment will be based on the interest rate, loan balance, and loan term.
—The interest rate will be based on the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year (your index), plus our margin. Ask us for our current interest rate and margin. —Information about the index rate is published weekly in the Wall Street Journal.• 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.
How Your Interest Rate Can Change• 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.
How Your Monthly Payment Can Change• 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; 6 × 106.03 = $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.]
[ExampleThe 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:
| Amount | $10,000 | Term | 30 years | Payment adjustment | 1 year | Interest adjustment | 1 year | Margin | 3 percentage points | Caps________ 2 percentage points annual interest rate | ________ 5 percentage points lifetime interest rate | Index________ Weekly average yield on U.S. Treasury securities adjusted to a constant maturity of one year. |
| Year
(as of 1st week ending in July) | Index
(%) | Margin*
(percentage points) | Interest
Rate (%) | Monthly
Payment ($) | Remaining
Balance ($) | 1982 | 14.41 | 3 | 17.41 | 145.90 | 9,989.37 | 1983 | 9.78 | 3 | **15.41 | 129.81 | 9,969.66 | 1984 | 12.17 | 3 | 15.17 | 127.91 | 9,945.51 | 1985 | 7.66 | 3 | **13.17 | 112.43 | 9,903.70 | 1986 | 6.36 | 3 | ***12.41 | 106.73 | 9,848.94 | 1987 | 6.71 | 3 | ***12.41 | 106.73 | 9,786.98 | 1988 | 7.52 | 3 | ***12.41 | 106.73 | 9,716.88 | 1989 | 7.97 | 3 | ***12.41 | 106.73 | 9,637.56 | 1990 | 8.06 | 3 | ***12.41 | 106.73 | 9,547.83 | 1991 | 6.40 | 3 | ***12.41 | 106.73 | 9,446.29 | 1992 | 3.96 | 3 | ***12.41 | 106.73 | 9,331.56 | 1993 | 3.42 | 3 | ***12.41 | 106.73 | 9,201.61 | 1994 | 5.47 | 3 | ***12.41 | 106.73 | 9,054.72 | 1995 | 5.53 | 3 | ***12.41 | 106.73 | 8,888.52 | 1996 | 5.82 | 3 | ***12.41 | 106.73 | 8,700.37 |
|---|
*This is a margin we have used recently; your margin may be different.
**This interest rate reflects a 2 percentage point annual interest rate cap.
***This interest rate reflects a 5 percentage point lifetime interest rate cap.
Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: $60,000 ÷ $10,000 = 6; 6 × $106.73 = $640.38.)
• 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.]
H-17(A) Debt Suspension Model Clause
Please enroll me in the optional [insert name of program], and bill my account the fee of [insert charge for the initial term of coverage]. I understand that enrollment is not required to obtain credit. I also understand that depending on the event, the protection may only temporarily suspend my duty to make minimum payments, not reduce the balance I owe. I understand that my balance will actually grow during the suspension period as interest continues to accumulate.
[To Enroll, Sign Here]/[To Enroll, Initial Here]. X ____________________
H-17(B) Debt Suspension SamplePlease enroll me in the optional [name of program], and bill my account the fee of $200.00. I understand that enrollment is not required to obtain credit. I also understand that depending on the event, the protection may only temporarily suspend my duty to make minimum payments, not reduce the balance I owe. I understand that my balance will actually grow during the suspension period as interest continues to accumulate.
To Enroll, Initial Here. X ____________________