FDIC Supervisory Insights Summer 2009

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From the Examiner’s Desk continued from pg. 37 A side-by-side comparison of the differences between the 2008 early disclosures amendments to Regulation Z (i.e., those that were to take effect October 1, 2009, but now will not) and the superseding 2009 early disclosure amendments (i.e., those that will take effect starting July 30, 2009) appears below. Regulation Z Early Disclosure Requirements of Section 226.19 2008 Revisions (will not take effect) vs. 2009 Revisions (effective July 30, 2009) Early TIL Disclosure 2008 Revisions (never took effect) Applies to loan to: Purchase or construct home, refinance home, and home equity loans 2009 Revisions (effective 7/30/09) Same Secured by: Principal dwelling Any consumer dwelling Timing of delivery: Within three business days of application Content: Good faith estimate of 226.18 disclosures Timing of re-disclosure (if APR outside 226.22 tolerance): Must be given no later than consummation or settlement Application fee: No application fee allowed until after early disclosures provided, except for a credit report fee Within three business days of application and at least seven business days before consummation (Timing waiver for bona fide emergency) Good faith estimate of 226.18 disclosures and the statement: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.” Must be given at least three business days before consummation 38 Supervisory Insights Summer 2009 Same
Advertising In general, Regulation Z requires advertisements for mortgages (obtained for a personal, family, or household purpose, secured by a consumer’s dwelling) to provide accurate and balanced information, in a clear and conspicuous manner, about rates, monthly payments, and other loan features. It prohibits advertisements that fail to do this. Prohibited Advertisements for Closed-End Mortgages 41 PRACTICE PROHIBITED ADVERTISEMENT Advertising “fixed” rates or payments. Advertisements that state “fixed” rates or payments for loans whose rates or payments can vary without adequately disclosing that the interest rate or payment amounts are “fixed” only for a limited period of time, rather than for the full term of the loan. Advertising an example of a rate or payment and comparing it to the consumer’s rate or payment. Advertising a “government” association with the loan product. Advertising that includes the name of the consumer’s current mortgage lender. Advertising that makes claim of debt elimination. Advertising that suggests the establishment of a “counselor” relationship. Advertising selective attributes of a loan product in a foreign language. 41 See Section 226.24 http://www.fdic.gov/news/news/financial/2008/fil08134a.html. Regulation Z, as amended, delineates several mortgage advertising practices and, effective October 1, 2009, specifically prohibits them as deceptive or misleading. The following two tables (one applicable to closed-end mortgages and the other to home-equity plans) set forth the practices and prohibitions addressed by the advertising provisions of amended Regulation Z. Advertisements that compare an actual or hypothetical rate or payment obligation to the rates or payments that would apply if the consumer obtains the advertised product unless the advertisement states the rates or payments that will apply over the full term of the loan. Advertisements that characterize the products offered as “government-supported loans,” or otherwise endorsed or sponsored by a federal or state government entity when, in fact, the advertised products are not government-supported or government-sponsored loans. Advertisements, such as solicitation letters, that display the name of the consumer’s current mortgage lender, unless the advertisement also prominently discloses that the advertisement is from a mortgage lender not affiliated with the consumer’s current lender. Advertisements that make claims of debt elimination if the product advertised would merely replace one debt obligation with another. Advertisements that create a false impression that the mortgage broker or lender is a “counselor” for the consumer. Foreign-language advertisements in which certain information, such as a low introductory “teaser” rate, is provided in a foreign language, while required disclosures are provided only in English. Supervisory Insights Summer 2009 39
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FDIC Supervisory Insights Summer 2009

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