CFPB TRID Sec. 14.11 - If using appendix D to calculate the periodic payments, how does the creditor disclose “Can this Amount Increase after Closing?”

Compliance > Regulation Z - TILA / TRID Specific > General Info

Q:  If using appendix D to calculate the periodic payments, how does the creditor disclose “Can this Amount Increase after Closing?”

 

A:  If the amounts or timing of construction phase advances are unknown at or before consummation, and a creditor uses Option One under appendix D to calculate the payment, the creditor discloses “YES” in response to the question “Can this amount increase after closing?”. The creditor discloses “YES” even if the appendix D calculation produces payments of equal amount. (Comment app D-7.iv). While the calculations in Option One of appendix D will provide one equal amount for purposes of disclosure, this is not the actual amount the consumer will pay each month. The periodic payment amount will change, and will increase as the consumer makes draws. Thus, the creditor discloses “Yes,” even though the payments amounts are not known at consummation and appendix D calculations disclose one equal amount for the construction phase monthly payment.

 

When the creditor uses appendix D to calculate the monthly payment and discloses “Yes” in response to the question “Can this amount increase after Closing?” the other Loan Terms table disclosures are still required. The creditor can disclose months or years when disclosing how often the payment may adjust in the Loan Terms table. The creditor similarly will base the maximum payment amount disclosure in the Loan Terms table on the maximum principal balance available to the consumer during the construction phase. The creditor discloses month 1 as the month when the payment adjustment might first occur.

 

Additionally, disclosures in the Adjustable Payments Table will also be required when the creditor uses appendix D to calculate the monthly payment and discloses “Yes” in the Loan Terms table. The creditor may omit and leave blank the amount and range of the first periodic principal and interest payment that may change. However, the timing of the first change is still disclosed, and is disclosed as the first payment, given the drawn loan balance for the first payment will likely not be the same as the balance used to calculate under appendix D. The other disclosures in the Adjustable Payments Table are also included (Comment app D-7.iv)

 

For loans that are adjustable rate, the creditor also discloses the Adjustable Interest Rate Table.

 

 

This information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/

 

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