LIBOR CFPB FAQ ARMs 11 – May information be added to the ARM interest rate adjustment notices to notify the consumer of the LIBOR transition for existing loans?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  May information be added to the ARM interest rate adjustment notices to notify the consumer of the LIBOR transition for existing loans?
 
A:   No. Information other than that required by the regulation (i.e., identifying the applicable index, payment, etc.) may not be added into the disclosure itself. However, the rule provides some flexibility for servicers to communicate additional information to the consumer when sending the notices, so long as that information is not provided within the ARM notice itself.
 
For the Initial Interest Rate Adjustment Notice, Regulation Z requires that the disclosures be provided in the same order as and be substantially similar to the forms in Appendix H of Regulation Z. 12 CFR § 1026.20(d)(3). The notice must also be on a separate document from other documents provided to the consumer. 12 CFR § 1026.17(a)(1); Comment 20(d)-3. Therefore, unrequired information about the LIBOR transition may not be included in the ARM notice and LIBOR transition information may not be included on the same piece of paper as the ARM notice.
 
But note, additional information may be provided in the same envelope as the Initial Interest Rate Adjustment Notice. Comment 20(d)-3. Thus, while additional information may not be included in the notice itself, the information may, but is not required to, be placed on a separate LIBOR transition notice document in the same envelope used to send the Initial Interest Rate Adjustment Notice to the consumer.
 
For the Subsequent Interest Rate Adjustment Notices, the regulation requires that the disclosures be provided in the same order as and be substantially similar to the forms in Appendix H of Regulation Z. 12 CFR § 1026.20(c)(3)(i). However, there is no requirement that the Subsequent Interest Rate Adjustment Notices be in a separate document. Thus, additional LIBOR transition-related information may be placed in the same document as the Subsequent Interest Rate Adjustment Notice, so long as the information is segregated from the disclosures itself, and the Subsequent Interest Rate Adjustment Notice is substantially similar to the model forms and still clear and conspicuous.
 
Notices regarding the LIBOR transition may also be sent separately from the ARM interest rate adjustment notices at any time.
 
For more information on the ARM interest rate adjustment notices, see Section 6 of the Mortgage Servicing Small Entity Compliance Guide.
 
 
This Q&A was created based on information from the Consumer Financial Protection Bureau’s website (which may be updated from time to time) that provides Answers to Frequently Asked Questions on the Transition Away from LIBOR.  This information may be found here:  https://files.consumerfinance.gov/f/documents/cfpb_libor-transition_faqs.pdf
 

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