laws & Regs

WReier-Aviles on DSKGBLS3C1PROD with CFR

§ 226.18

12 CFR Ch. II (1–1–11 Edition)

creditor shall disclose before consummation (subject to the provisions
of § 226.19(a)(2) and § 226.19(a)(5)(iii)): 39
(1) Any changed term unless the term
was based on an estimate in accordance
with § 226.17(c)(2) and was labelled an
estimate;
(2) All changed terms, if the annual
percentage rate at the time of consummation varies from the annual percentage rate disclosed earlier by more
than 1⁄8 of 1 percentage point in a regular transaction, or more than 1⁄4 of 1
percentage point in an irregular transaction, as defined in § 226.22(a).
(g) Mail or telephone orders—delay in
disclosures. Except for private education loan disclosures made in compliance with § 226.47, if a creditor receives
a purchase order or a request for an extension of credit by mail, telephone, or
facsimile machine without face-to-face
or direct telephone solicitation, the
creditor may delay the disclosures
until the due date of the first payment,
if the following information for representative amounts or ranges of credit
is made available in written form or in
electronic form to the consumer or to
the public before the actual purchase
order or request:
(1) The cash price or the principal
loan amount.
(2) The total sale price.
(3) The finance charge.
(4) The annual percentage rate, and if
the rate may increase after consummation, the following disclosures:
(i) The circumstances under which
the rate may increase.
(ii) Any limitations on the increase.
(iii) The effect of an increase.
(5) The terms of repayment.
(h) Series of sales—delay in disclosures.
If a credit sale is one of a series made
under an agreement providing that
subsequent sales may be added to an
outstanding balance, the creditor may
delay the required disclosures until the
due date of the first payment for the
current sale, if the following two conditions are met:
(1) The consumer has approved in
writing the annual percentage rate or
rates, the range of balances to which
they apply, and the method of treating
39 [Reserved]

any unearned finance charge on an existing balance.
(2) The creditor retains no security
interest in any property after the creditor has received payments equal to the
cash price and any finance charge attributable to the sale of that property.
For purposes of this provision, in the
case of items purchased on different
dates, the first purchased is deemed the
first item paid for; in the case of items
purchased on the same date, the lowest
priced is deemed the first item paid for.
(i) Interim student credit extensions.
For transactions involving an interim
credit extension under a student credit
program for which an application is received prior to the mandatory compliance date of §§ 226.46, 47, and 48, the
creditor need not make the following
disclosures: the finance charge under
§ 226.18(d), the payment schedule under
§ 226.18(g), the total of payments under
§ 226.18(h), or the total sale price under
§ 226.18(j) at the time the credit is actually extended. The creditor must make
complete disclosures at the time the
creditor and consumer agree upon the
repayment schedule for the total obligation. At that time, a new set of disclosures must be made of all applicable
items under § 226.18.
[Reg. Z, 46 FR 20892, Apr. 7, 1981, as amended
at 52 FR 48670, Dec. 24, 1987; 61 FR 49246, Sept.
19, 1996; 66 FR 17338, Mar. 30, 2001; 67 FR 16982,
Apr. 9, 2002; 72 FR 63474, Nov. 9, 2007; 73 FR
44600, July 30, 2008; 74 FR 23301, May 19, 2009;
73 FR 44600, July 30, 2008; 74 FR 41232, Aug.
14, 2009]

§ 226.18

Content of disclosures.

For each transaction, the creditor
shall disclose the following information as applicable:
(a) Creditor. The identity of the creditor making the disclosures.
(b) Amount financed. The amount financed, using that term, and a brief description such as the amount of credit
provided to you or on your behalf. The
amount financed is calculated by:
(1) Determining the principal loan
amount or the cash price (subtracting
any downpayment);
(2) Adding any other amounts that
are financed by the creditor and are
not part of the finance charge; and
(3) Subtracting any prepaid finance
charge.

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Federal Reserve System

§ 226.18

WReier-Aviles on DSKGBLS3C1PROD with CFR

(c) Itemization of amount financed. (1)
A separate written itemization of the
amount financed, including: 40
(i) The amount of any proceeds distributed directly to the consumer.
(ii) The amount credited to the consumer’s account with the creditor.
(iii) Any amounts paid to other persons by the creditor on the consumer’s
behalf. The creditor shall identify
those persons. 41
(iv) The prepaid finance charge.
(2) The creditor need not comply with
paragraph (c)(1) of this section if the
creditor provides a statement that the
consumer has the right to receive a
written itemization of the amount financed, together with a space for the
consumer to indicate whether it is desired, and the consumer does not request it.
(d) Finance charge. The finance
charge, using that term, and a brief description such as ‘‘the dollar amount
the credit will cost you.’’
(1) Mortgage loans. In a transaction
secured by real property or a dwelling,
the disclosed finance charge and other
disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate)
shall be treated as accurate if the
amount disclosed as the finance
charge:
(i) Is understated by no more than
$100; or
(ii) Is greater than the amount required to be disclosed.
(2) Other credit. In any other transaction, the amount disclosed as the finance charge shall be treated as accurate if, in a transaction involving an
amount financed of $1,000 or less, it is
not more than $5 above or below the
amount required to be disclosed; or, in
a transaction involving an amount financed of more than $1,000, it is not
40 Good faith estimates of settlement costs
provided for transactions subject to the Real
Estate Settlement Procedures Act (12 U.S.C.
2601 et seq.) may be substituted for the disclosures required by paragraph (c) of this section.
41 The following payees may be described
using generic or other general terms and
need not be further identified: public officials or government agencies, credit reporting agencies, appraisers, and insurance companies.

more than $10 above or below the
amount required to be disclosed.
(e) Annual percentage rate. The annual
percentage rate, using that term, and a
brief description such as ‘‘the cost of
your credit as a yearly rate.’’ 42
(f) Variable rate. (1) If the annual percentage rate may increase after consummation in a transaction not secured by the consumer’s principal
dwelling or in a transaction secured by
the consumer’s principal dwelling with
a term of one year or less, the following disclosures: 43
(i) The circumstances under which
the rate may increase.
(ii) Any limitations on the increase.
(iii) The effect of an increase.
(iv) An example of the payment
terms that would result from an increase.
(2) If the annual percentage rate may
increase after consummation in a
transaction secured by the consumer’s
principal dwelling with a term greater
than one year, the following disclosures:
(i) The fact that the transaction contains a variable-rate feature.
(ii) A statement that variable-rate
disclosures have been provided earlier.
(g) Payment schedule. Other than for a
transaction that is subject to paragraph (s) of this section, the number,
amounts, and timing of payments
scheduled to repay the obligation.
(1) In a demand obligation with no alternate maturity date, the creditor
may comply with this paragraph by
disclosing the due dates or payment periods of any scheduled interest payments for the first year.
(2) In a transaction in which a series
of payments varies because a finance
charge is applied to the unpaid principal balance, the creditor may comply
with this paragraph by disclosing the
following information:
42 For any transaction involving a finance
charge of $5 or less on an amount financed of
$75 or less, or a finance charge of $7.50 or less
on an amount financed of more than $75, the
creditor need not disclose the annual percentage rate.
43 Information provided in accordance with
§§ 226.18(f)(2) and 226.19(b) may be substituted
for the disclosures required by paragraph
(f)(1) of this section.

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WReier-Aviles on DSKGBLS3C1PROD with CFR

§ 226.18

12 CFR Ch. II (1–1–11 Edition)

(i) The dollar amounts of the largest
and smallest payments in the series.
(ii) A reference to the variations in
the other payments in the series.
(h) Total of payments. The total of payments, using that term, and a descriptive explanation such as ‘‘the amount
you will have paid when you have made
all scheduled payments.’’ 44
(i) Demand feature. If the obligation
has a demand feature, that fact shall
be disclosed. When the disclosures are
based on an assumed maturity of 1 year
as provided in § 226.17(c)(5), that fact
shall also be disclosed.
(j) Total sale price. In a credit sale,
the total sale price, using that term, and
a descriptive explanation (including
the amount of any downpayment) such
as ‘‘the total price of your purchase on
credit, including your downpayment of
$ll.’’ The total sale price is the sum
of the cash price, the items described
in paragraph (b)(2), and the finance
charge disclosed under paragraph (d) of
this section.
(k) Prepayment. (1) When an obligation includes a finance charge computed from time to time by application
of a rate to the unpaid principal balance, a statement indicating whether
or not a penalty may be imposed if the
obligation is prepaid in full.
(2) When an obligation includes a finance charge other than the finance
charge described in paragraph (k)(1) of
this section, a statement indicating
whether or not the consumer is entitled to a rebate of any finance charge if
the obligation is prepaid in full.
(l) Late payment. Any dollar or percentage charge that may be imposed
before maturity due to a late payment,
other than a deferral or extension
charge.
(m) Security interest. The fact that the
creditor has or will acquire a security
interest in the property purchased as
part of the transaction, or in other
property identified by item or type.
(n) Insurance and debt cancellation.
The items required by § 226.4(d) in order
to exclude certain insurance premiums
and debt cancellation fees from the finance charge.
44 In any transaction involving a single
payment, the creditor need not disclose the
total of payments.

(o) Certain security interest charges.
The disclosures required by § 226.4(e) in
order to exclude from the finance
charge certain fees prescribed by law or
certain premiums for insurance in lieu
of perfecting a security interest.
(p) Contract reference. A statement
that the consumer should refer to the
appropriate contract document for information about nonpayment, default,
the right to accelerate the maturity of
the obligation, and prepayment rebates
and penalties. At the creditor’s option,
the statement may also include a reference to the contract for further information about security interests and,
in a residential mortgage transaction,
about the creditor’s policy regarding
assumption of the obligation.
(q) Assumption policy. In a residential
mortgage transaction, a statement
whether or not a subsequent purchaser
of the dwelling from the consumer may
be permitted to assume the remaining
obligation on its original terms.
(r) Required deposit. If the creditor requires the consumer to maintain a deposit as a condition of the specific
transaction, a statement that the annual percentage rate does not reflect
the effect of the required deposit. 45
(s) Interest rate and payment summary
for mortgage transactions. For a closedend transaction secured by real property or a dwelling, other than a transaction secured by a consumer’s interest
in a timeshare plan described in 11
U.S.C. 101(53D), the creditor shall disclose the following information about
the interest rate and payments:
(1) Form of disclosures. The information in paragraphs (s)(2)–(4) of this section shall be in the form of a table,
with no more than five columns, with
headings and format substantially
similar to Model Clause H–4(E), H–4(F),
H–4(G), or H–4(H) in appendix H to this
part. The table shall contain only the
information required in paragraphs
(s)(2)–(4) of this section, shall be placed
in a prominent location, and shall be in
a minimum 10-point font.
45 A required deposit need not include, for
example: (1) An escrow account for items
such as taxes, insurance or repairs; (2) a deposit that earns not less than 5 percent per
year; or (3) payments under a Morris Plan.

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WReier-Aviles on DSKGBLS3C1PROD with CFR

Federal Reserve System

§ 226.18

(2) Interest rates—(i) Amortizing loans.
(A) For a fixed-rate mortgage, the interest rate at consummation.
(B) For an adjustable-rate or steprate mortgage—
(1) The interest rate at consummation and the period of time until the
first interest rate adjustment may
occur, labeled as the ‘‘introductory rate
and monthly payment’’;
(2) The maximum interest rate that
may apply during the first five years
after consummation and the earliest
date on which that rate may apply, labeled as ‘‘maximum during first five
years’’; and
(3) The maximum interest rate that
may apply during the life of the loan
and the earliest date on which that
rate may apply, labeled as ‘‘maximum
ever.’’
(C) If the loan provides for payment
increases as described in paragraph
(s)(3)(i)(B) of this section, the interest
rate in effect at the time the first such
payment increase is scheduled to occur
and the date on which the increase will
occur, labeled as ‘‘first adjustment’’ if
the loan is an adjustable-rate mortgage
or, otherwise, labeled as ‘‘first increase.’’
(ii) Negative amortization loans. For a
negative amortization loan—
(A) The interest rate at consummation and, if it will adjust after consummation, the length of time until it
will adjust, and the label ‘‘introductory’’ or ‘‘intro’’;
(B) The maximum interest rate that
could apply when the consumer must
begin making fully amortizing payments under the terms of the legal obligation;
(C) If the minimum required payment
will increase before the consumer must
begin making fully amortizing payments, the maximum interest rate that
could apply at the time of the first
payment increase and the date the increase is scheduled to occur; and
(D) If a second increase in the minimum required payment may occur before the consumer must begin making
fully amortizing payments, the maximum interest rate that could apply at
the time of the second payment increase and the date the increase is
scheduled to occur.

(iii) Introductory rate disclosure for
amortizing adjustable-rate mortgages. For
an amortizing adjustable-rate mortgage, if the interest rate at consummation is less than the fully-indexed rate,
placed in a box directly beneath the
table required by paragraph (s)(1) of
this section, in a format substantially
similar to Model Clause H–4(I) in appendix H to this part—
(A) The interest rate that applies at
consummation and the period of time
for which it applies;
(B) A statement that, even if market
rates do not change, the interest rate
will increase at the first adjustment
and a designation of the place in sequence of the month or year, as applicable, of such rate adjustment; and
(C) The fully-indexed rate.
(3) Payments for amortizing loans—(i)
Principal and interest payments. If all
periodic payments will be applied to
accrued interest and principal, for each
interest rate disclosed under paragraph
(s)(2)(i) of this section—
(A) The corresponding periodic principal and interest payment, labeled as
‘‘principal and interest;’’
(B) If the periodic payment may increase without regard to an interest
rate adjustment, the payment that corresponds to the first such increase and
the earliest date on which the increase
could occur;
(C) That an escrow account is required, if applicable, and an estimate
of the amount of taxes and insurance,
including any mortgage insurance; and
(D) The sum of the amounts disclosed
under paragraphs (s)(3)(i)(A) and (C) of
this section or (s)(3)(i)(B) and (C) of
this section, as applicable, labeled as
‘‘total estimated monthly payment.’’
(ii) Interest-only payments. If the loan
is an interest-only loan, for each interest rate disclosed under paragraph
(s)(2)(i) of this section, the corresponding periodic payment and—
(A) If the payment will be applied to
only accrued interest, the amount applied to interest, labeled as ‘‘interest
payment,’’ and a statement that none
of the payment is being applied to principal;
(B) If the payment will be applied to
accrued interest and principal, the earliest date that such payments will be
required and an itemization of the

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WReier-Aviles on DSKGBLS3C1PROD with CFR

§ 226.18

12 CFR Ch. II (1–1–11 Edition)

amount applied to accrued interest and
the amount applied to principal, labeled as ‘‘interest payment’’ and ‘‘principal payment,’’ respectively;
(C) The escrow information described
in paragraph (s)(3)(i)(C) of this section;
and
(D) The sum of all amounts required
to be disclosed under paragraphs
(s)(3)(ii)(A) and (C) of this section or
(s)(3)(ii)(B) and (C) of this section, as
applicable, labeled as ‘‘total estimated
monthly payment.’’
(4) Payments for negative amortization
loans. For negative amortization loans:
(i)(A) The minimum periodic payment required until the first payment
increase or interest rate increase, corresponding to the interest rate disclosed under paragraph (s)(2)(ii)(A) of
this section;
(B) The minimum periodic payment
that would be due at the first payment
increase and the second, if any, corresponding to the interest rates described in paragraphs (s)(2)(ii)(C) and
(D) of this section; and
(C) A statement that the minimum
payment pays only some interest, does
not repay any principal, and will cause
the loan amount to increase;
(ii) The fully amortizing periodic
payment amount at the earliest time
when such a payment must be made,
corresponding to the interest rate disclosed under paragraph (s)(2)(ii)(B) of
this section; and
(iii) If applicable, in addition to the
payments in paragraphs (s)(4)(i) and (ii)
of this section, for each interest rate
disclosed under paragraph (s)(2)(ii) of
this section, the amount of the fully
amortizing periodic payment, labeled
as the ‘‘full payment option,’’ and a
statement that these payments pay all
principal and all accrued interest.
(5) Balloon payments. (i) Except as
provided in paragraph (s)(5)(ii) of this
section, if the transaction will require
a balloon payment, defined as a payment that is more than two times a
regular periodic payment, the balloon
payment shall be disclosed separately
from other periodic payments disclosed
in the table under this paragraph (s),
outside the table and in a manner substantially similar to Model Clause H–
4(J) in appendix H to this part.

(ii) If the balloon payment is scheduled to occur at the same time as another payment required to be disclosed
in the table pursuant to paragraph
(s)(3) or (s)(4) of this section, then the
balloon payment must be disclosed in
the table.
(6) Special disclosures for loans with
negative amortization. For a negative
amortization loan, the following information, in close proximity to the table
required in paragraph (s)(1) of this section, with headings, content, and format substantially similar to Model
Clause H–4(G) in appendix H to this
part:
(i) The maximum interest rate, the
shortest period of time in which such
interest rate could be reached, the
amount of estimated taxes and insurance included in each payment disclosed, and a statement that the loan
offers payment options, two of which
are shown.
(ii) The dollar amount of the increase
in the loan’s principal balance if the
consumer makes only the minimum required payments for the maximum possible time and the earliest date on
which the consumer must begin making fully amortizing payments, assuming that the maximum interest rate is
reached at the earliest possible time.
(7) Definitions. For purposes of this
§ 226.18(s):
(i) The term ‘‘adjustable-rate mortgage’’ means a transaction secured by
real property or a dwelling for which
the annual percentage rate may increase after consummation.
(ii) The term ‘‘step-rate mortgage’’
means a transaction secured by real
property or a dwelling for which the interest rate will change after consummation, and the rates that will
apply and the periods for which they
will apply are known at consummation.
(iii) The term ‘‘fixed-rate mortgage’’
means a transaction secured by real
property or a dwelling that is not an
adjustable-rate mortgage or a step-rate
mortgage.
(iv) The term ‘‘interest-only’’ means
that, under the terms of the legal obligation, one or more of the periodic payments may be applied solely to accrued
interest and not to loan principal; an

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§ 226.19

‘‘interest-only loan’’ is a loan that permits interest-only payments.
(v) The term ‘‘amortizing loan’’ means
a loan in which payment of the periodic payments does not result in an increase in the principal balance under
the terms of the legal obligation; the
term ‘‘negative amortization’’ means
payment of periodic payments that will
result in an increase in the principal
balance under the terms of the legal
obligation; the term ‘‘negative amortization loan’’ means a loan that permits
payments resulting in negative amortization, other than a reverse mortgage
subject to § 226.33.
(vi) The term ‘‘fully-indexed rate’’
means the interest rate calculated
using the index value and margin at
the time of consummation.
(t) ‘‘No-guarantee-to-refinance’’ statement. (1) Disclosure. For a closed-end
transaction secured by real property or
a dwelling, other than a transaction secured by a consumer’s interest in a
timeshare plan described in 11 U.S.C.
101(53D), the creditor shall disclose a
statement that there is no guarantee
the consumer can refinance the transaction to lower the interest rate or
periodic payments.
(2) Format. The statement required by
paragraph (t)(1) of this section must be
in a form substantially similar to
Model Clause H–4(K) in appendix H to
this part.
[46 FR 20892, Apr. 7, 1981; 46 FR 29246, June 1,
1981, as amended at 52 FR 48670, Dec. 24, 1987;
61 FR 49246, Sept. 19, 1996; 75 FR 58482, Sept.
24, 2010]
EFFECTIVE DATE NOTE: At 75 FR 81841, Dec.
29, 2010, § 226.18 was amended by revising
paragraphs
(s)(2)(i)(B)(2),
(s)(3)(i)(C),
(s)(3)(ii)(B), and (s)(7)(v), effective Jan. 30,
2011. For the convenience of the user, the revised text is set forth as follows:
§ 226.18

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Content of disclosures.

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(s) * * *
(2) * * *
(i) * * *
(B) * * *
(2) The maximum interest rate that may
apply during the first five years after the
date on which the first regular periodic payment will be due and the earliest date on

which that rate may apply, labeled as ‘‘maximum during first five years’’; and

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(ii) * * *
(B) If the payment will be applied to accrued interest and principal, an itemization
of the amount of the first such payment applied to accrued interest and to principal, labeled as ‘‘interest payment’’ and ‘‘principal
payment,’’ respectively;

*

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(7) * * *
(v) The term ‘‘amortizing loan’’ means a
loan in which payment of the periodic payments does not result in an increase in the
principal balance under the terms of the
legal obligation; the term ‘‘negative amortization’’ means payment of periodic payments
that will result in an increase in the principal balance under the terms of the legal obligation; the term ‘‘negative amortization
loan’’ means a loan, other than a reverse
mortgage subject to § 226.33, that provides for
a minimum periodic payment that covers
only a portion of the accrued interest, resulting in negative amortization.

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§ 226.19 Certain mortgage and variable-rate transactions.
(a) Mortgage transactions subject to
RESPA—(1)(i) Time of disclosures. In a
mortgage transaction subject to the
Real Estate Settlement Procedures Act
(12 U.S.C. 2601 et seq.) that is secured by
the consumer’s dwelling, other than a
home equity line of credit subject to
§ 226.5b or mortgage transaction subject
to paragraph (a)(5) of this section, the
creditor shall make good faith estimates of the disclosures required by
§ 226.18 and shall deliver or place them
in the mail not later than the third
business day after the creditor receives
the consumer’s written application.
(ii) Imposition of fees. Except as provided in paragraph (a)(1)(iii) of this section, neither a creditor nor any other

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(3) * * *
(i) * * *
(C) If an escrow account will be established, an estimate of the amount of taxes
and insurance, including any mortgage insurance, payable with each periodic payment; and

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