15 U.S.C. § 1638a: Reset of hybrid adjustable…

Summary

A hybrid adjustable-rate mortgage is a home loan that has a fixed interest rate for an initial period and then switches to a variable rate afterward. Requires lenders or loan servicers to send a separate written notice during a 1-month window that ends 6 months before the rate resets (or at loan closing if the reset happens within the first 6 months). The notice must include six things: which index or formula is used and where to find it; how the new rate and payment are calculated (including any added margin); a good-faith estimate of the monthly payment after the reset and the assumptions behind it; a list of alternatives and how to pursue them (like refinancing, renegotiating terms, payment forbearance, or a pre-foreclosure sale); contact information for HUD- or state-approved counseling programs; and the state housing finance authority’s contact details. The Federal Reserve Board can require a similar notice for other adjustable-rate mortgages.

Title 15, §1638a

Commerce and Trade, Source: USLM XML via OLRC

(a)Hybrid adjustable rate mortgages defined

For purposes of this section, the term “hybrid adjustable rate mortgage” means a consumer credit transaction secured by the consumer’s principal residence with a fixed interest rate for an introductory period that adjusts or resets to a variable interest rate after such period.

(b)Notice of reset and alternatives

During the 1-month period that ends 6 months before the date on which the interest rate in effect during the introductory period of a hybrid adjustable rate mortgage adjusts or resets to a variable interest rate or, in the case of such an adjustment or resetting that occurs within the first 6 months after consummation of such loan, at consummation, the creditor or servicer of such loan shall provide a written notice, separate and distinct from all other correspondence to the consumer, that includes the following:

(1)Any index or formula used in making adjustments to or resetting the interest rate and a source of information about the index or formula.

(2)An explanation of how the new interest rate and payment would be determined, including an explanation of how the index was adjusted, such as by the addition of a margin.

(3)A good faith estimate, based on accepted industry standards, of the creditor or servicer of the amount of the monthly payment that will apply after the date of the adjustment or reset, and the assumptions on which this estimate is based.

(4)A list of alternatives consumers may pursue before the date of adjustment or reset, and descriptions of the actions consumers must take to pursue these alternatives, including—

(A)refinancing;

(B)renegotiation of loan terms;

(C)payment forbearances; and

(D)pre-foreclosure sales.

(5)The names, addresses, telephone numbers, and Internet addresses of counseling agencies or programs reasonably available to the consumer that have been certified or approved and made publicly available by the Secretary of Housing and Urban Development or a State housing finance authority (as defined in section 1441a–1 of title 12).

(6)The address, telephone number, and Internet address for the State housing finance authority (as so defined) for the State in which the consumer resides.

(c)Savings clause

The Board may require the notice in paragraph (b) or other notice consistent with this chapter for adjustable rate mortgage loans that are not hybrid adjustable rate mortgage loans.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (c), was in the original “this Act” meaning Pub. L. 90–321, May 29, 1968, 82 Stat. 146, which is classified principally to this chapter. For complete classification of this Act to the Code, see

Short Title

note set out under section 1601 of this title and Tables.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective on the date on which final

Regulations

implementing such section take effect, or on the date that is 18 months after the designated transfer date, if such

Regulations

have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as an

Effective Date

of 2010 Amendment note under section 1601 of this title.

§1638a Reset of Hybrid Adjustable Rate Mortgages

Summary

Title 15, §1638a

Notes & Related Subsidiaries

Editorial Notes

References in Text

Short Title

Statutory Notes and Related Subsidiaries

Effective Date

Regulations

Regulations

Effective Date

Citations & Metadata