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In the September 24, 2010, issue of the Federal Register (75 F.R. 58470), the Board of Governors of the Federal Reserve System (FRB) published an interim rule (the Interim Rule) amending the payment schedule disclosure requirements in §226.18 of Regulation Z for closed-end mortgage loans for which a creditor receives applications on and after January 30, 2011. The Interim Rule revises the introductory text of §226.18(g), adds new §§226.18(s) and (t), revises and adds interpretive comments to Supplement I – Official Staff Interpretations, and adds new closed-end model clauses H-4(E) through H-4(K) to Appendix H-Closed-End Model Forms and Clauses. The Interim Rule implements those disclosure provisions of the Mortgage Disclosure Improvement Act of 2008 (Public Law 110-289, §§2501-2503) that amended Section 128 of the Truth in Lending Act (TILA), in pertinent part, by adding subsection 128(b)(2)(C) requiring disclosure of payment examples for loans whose interest rate or payments can change and a “no-guarantee-to-refinance” statement.

This memorandum addresses the following question: “When must a non-borrower coowner (i.e., spouse or separate co-owner who occupies the dwelling) receive a copy of the TILA disclosures for a loan rescindable under Section 226.23 of Regulation Z?”

On May 20, 2009, the President signed into law the “Helping Families Save Their Homes Act of 2009” (Public Law 111-22). Section 404(a) of the Act amends Section 131 of the Truth in Lending Act (TILA) to require that a borrower be notified in writing not later than 30 days after the borrower’s mortgage loan has been sold, transferred, or assigned. The notice must include information identifying the new creditor, the date of transfer, how to reach the new creditor, the location of where the transfer of the loan is recorded, and other relevant information regarding the new creditor. The new creditor is required to give this notice and the notice applies only to a consumer loan secured by the borrower’s principal dwelling.

In a final rule published in the May 19, 2009 issue of the Federal Register (the “May 2009 final rule”), the Federal Reserve Board (“Board”) amends the early disclosure requirements of Section 226.19(a) of Regulation Z to require: (1) early disclosures for all closed-end, dwelling-secured loans subject to Regulation Z and Regulation X (i.e., RESPA loans); and, (2) additional seven-business-day and three-business-day early disclosure requirements for these loans in addition to the existing disclosure requirement of Section 226.19(a)(1) requiring initial disclosures within three business days of loan application. The May 2009 final rule revises the Board’s July 30, 2008 final rule (“July 2008 final rule”) that also amended the early disclosure requirements of §226.19(a)(1).

On July 30, 2008, the Board of Governors of the Federal Reserve System (“Board”) published in the Federal Register (pages 44522 – 44614) its final rule (the “final rule”) amending Regulation Z and its Official Staff Interpretations. This memorandum will address only that section of the final rule that adds new Section 226.36 to provide new protections for all closed-end loans secured by a consumer’s principal dwelling. Section 226.36 is effective on October 1, 2009.

On July 30, 2008, the Board of Governors of the Federal Reserve System (“Board”) published in the Federal Register (pages 44522 – 44614) its final rule (the “final rule”) amending Regulation Z and its Official Staff Interpretations. This memorandum will address only those sections of the final rule that amend the advertising requirements of Regulation Z set out in Sections 226.16 (open-end home equity plans) and 226.24 (closed-end consumer credit transactions). These advertising amendments will impact the way creditors advertise open-end home equity plans and closed-end consumer credit transactions for advertisements occurring on or after October 1, 2009.

On January 9, 2008, the Board of Governors of the Federal Reserve System (“Board”) proposed significant amendments to Regulation Z, which are discussed in this memorandum. We believe these proposed amendments will have a dramatic impact on the way mortgage lending is conducted if the Board adopts them, as proposed.

Recent federal cases have raised Truth in Lending disclosure issues regarding lock-in agreements with non-refundable lock-in fees on loans subject to the consumer’s right of rescission under the Truth in Lending Act (15 U.S.C. §1635(b) and Regulation Z, §226.23(d)). The problem arises with the wording of the lock-in agreement and the circumstances stated by the lender under which the lock-in fee is non-refundable.