Jump to main content

# Why am I getting a transaction warning regarding the Truth in Lending disclosures?

Regulation Section 1026.18(s) Supported Transactions

The Federal Reserve Board issued a September 24, 2010 interim rule which amended Regulation Z. The Interim Rule created new Section 1026.18(s) that requires an Interest Rate and Payment Summary in place of the payment schedule for closed-end credit transactions secured by real property or a dwelling (excluding timeshares). The summary contains the disclosure of the interest rates that are applicable at various stages of the loan, along with corresponding payments. Principal and interest payments (or interest-only and principal-only payments, as applicable); escrow payments for taxes and insurance; and mortgage insurance payments must be disclosed separately and as a total. The introductory rate disclosures in variable rate transactions; the balloon payment disclosure; and the “no-guarantee-to-refinance” statement are also required. The FRB recognizes that the models describe only some of the loan programs offered by the industry, but the Interim Rule does not provide guidance for “unusual” transactions. Some of these transactions include:

- Skip Payment
- Negative Amortization
- Transactions with a repayment method of Two phase and the payment frequency for the interest only phase and permanent phase are not the same

A validation warning will be provided for transactions with these transaction characteristics. Your compliance officer will need to determine how to appropriately complete the Truth in Lending disclosures (including the Fed Box, credit insurance disclosures (if required), the itemization of amount financed (if required), etc).