LIBOR CFPB FAQ ARMs 13 – If sending voluntary notices identifying the future replacement index with the required ARM servicing disclosures that identify LIBOR as the currently applicable index, is there any language that can be added...?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  If sending voluntary notices identifying the future replacement index with the required ARM servicing disclosures that identify LIBOR as the currently applicable index, is there any language that can be added to the required disclosures to explain the difference?
 
A:   In addition to the regulatory required notices described in LIBOR Adjustable-Rate Mortgage FAQ 8 above, creditors may choose to send voluntary notices to the consumer to help explain the LIBOR transition and account impacts, as discussed in LIBOR General FAQs 4 and 5. When doing so, it is possible that the required disclosure may reference LIBOR, while the voluntary notice describes how another index will replace the LIBOR index in the future.

If this occurs, creditors may wonder whether they can add information to the required notices. A creditor can add information only in certain circumstances, as discussed in LIBOR Adjustable-Rate Mortgage FAQs 11 and 12.

In all cases, however, information can be added to the voluntary notice to explain that LIBOR was identified on the required notice because LIBOR is currently the index that applies to the mortgage loan account or was used to calculate the new payment amount discussed on the notice, but that another index will replace the LIBOR index on a future date.
 
 
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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