§1638a — Title 15 Commerce and Trade | U.S. Code

Summary

Requires lenders or loan servicers to send a separate written notice to a borrower before a hybrid adjustable-rate mortgage’s interest rate switches from the fixed introductory rate to a variable rate. A hybrid adjustable-rate mortgage is a home loan on your main residence that has a fixed rate for a short introductory period and then changes to a variable rate. The notice must be sent during the one-month period that ends six months before the rate change; if the rate change happens within the first six months after the loan closes, the notice must be given at closing. The notice must say which index or formula will be used and where to find it; explain how the new interest rate and monthly payment are worked out (including any margin added to the index); give a good-faith estimate of the new monthly payment and the assumptions behind it; list options the borrower can try before the rate change and how to pursue them (for example, refinancing, renegotiating terms, payment forbearance, and pre-foreclosure sale); and provide contact details for HUD-approved or state-approved counseling agencies and for the State housing finance authority. The Board may require a similar notice for other adjustable-rate mortgages that are not hybrids.

Title 15, §1638a

Commerce and Trade — Source: USLM XML via OLRC

(a)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)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)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