PRIA, Government Policy, Made Personal

Summary

Any adjustable-rate mortgage must have a cap that limits how high the interest rate can go during the life of the loan. The Board of Governors of the Federal Reserve System must write rules to put this into practice. If a lender breaks this rule, it counts as a Truth in Lending Act violation and can be enforced under section 108 (15 U.S.C. 1607) or lead to civil damages under section 130 (15 U.S.C. 1640), or both. Definitions: "creditor" means someone who regularly makes loans for personal, family, or household use. "Adjustable-rate mortgage loan" means a consumer loan secured by a lien on a one- to four-family home (including condos, co-ops, or mobile homes) where the lender can change the interest rate. The rule took effect 120 days after August 10, 1987.

Title 12, §3806

Banks and Banking, Source: USLM XML via OLRC

(a)In general

Any adjustable rate mortgage loan originated by a creditor shall include a limitation on the maximum interest rate that may apply during the term of the mortgage loan.

(b)Regulations

The Board of Governors of the Federal Reserve System shall prescribe regulations to carry out the purposes of this section.

(c)Enforcement

Any violation of this section shall be treated as a violation of the Truth in Lending Act [15 U.S.C. 1601 et seq.] and shall be subject to administrative enforcement under section 108 [15 U.S.C. 1607] or civil damages under section 130 [15 U.S.C. 1640] of such Act, or both.

(d)Definitions

For the purpose of this section

(1)

(2)the term “adjustable rate mortgage loan” means any consumer loan secured by a lien on a one- to four-family dwelling unit, including a condominium unit, cooperative housing unit, or mobile home, where the loan is made pursuant to an agreement under which the creditor may, from time to time, adjust the rate of interest.

(e)Effective date

This section shall take effect upon the expiration of 120 days after August 10, 1987.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Truth in Lending Act, referred to in subsec. (c), is title I of Pub. L. 90–321, May 29, 1968, 82 Stat. 146, which is classified generally to subchapter I (§ 1601 et seq.) of chapter 41 of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see

Short Title

note set out under section 1601 of Title 15 and Tables. Codification Section was enacted as part of the Competitive Equality Banking Act of 1987, and not as part of the Alternative Mortgage Transaction Parity Act of 1982 which comprises this chapter.

Amendments

1992—Subsec. (d)(2). Pub. L. 102–550 substituted “any consumer loan” for “any loan”.

§3806 Adjustable Rate Mortgage Caps