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. The Interim Rule will substantially affect the substance and format of the initial and final disclosures required by §226.18 of Regulation Z (herein “TILA disclosure”). Thus, the Interim Rule should be of immediate concern to the mortgage lending industry. Although compliance with the Interim Rule is mandatory on January 30, 2011, the FRB intends to conduct additional testing and may revise the Interim Rule in light of further testing results. For this reason, the FRB is also soliciting comments on the Interim Rule. If you wish to submit comments, the FRB must receive them on or before November 23, 2010. The instructions for submitting comments to the FRB can found on page 58470 of the above-cited issue of the Federal Register in the section entitled “ADDRESSES.”

Complete Memorandum