Commitment - A formal agreement between a lender and borrower to lend up to a specified amount of money at a specified future date subject to specific performance criteria and repayment terms.

Commitment fee - The fee associated with the establishment of a loan commitment. The fee is usually expressed as a percentage of the loan commitment.

Common size statement - A financial statement expressed in percentages of the total rather than dollar amounts. It shows the relative amount that each component contributes to the total.

It allows for the comparison of firms of different sizes. Compensating balance - A minimum account balance that a borrower is required to maintain as a requirement of obtaining a loan.

It raises the effective interest rate on the loan. Co-signer - An individual, in addition to the borrower, who signs a note and thus assumes responsibility and liability for repayment. Cost of funds - Refers to the interest and non-interest cost of obtaining equity and debt funds.

Correspondent bank - A bank that performs specific functions for another bank respondent bank. Functions may include loan participation, check clearing, data processing, cash management and consulting services. Covenant - A legal promise in a note, loan agreement, security agreement or mortgage to do or not to do specific acts; or a promise that certain conditions do or do not exist.

A breach breaking of a covenant can lead to the injured party pursuing legal remedies and can be a basis for foreclosure. Current ratio - A liquidity ratio calculated as current assets divided by current liabilities.

Debt-to-asset ratio - A solvency ratio calculated as total liabilities divided by total assets. Debtor - The person who either owes payment or other performance on an obligation such as a contract or note.

Default - The failure of a borrower to meet the financial obligations of a loan or a breach of any of the other terms or covenants of a loan. Down payment - The amount of equity funds invested in the purchase of an asset. The down payment plus the amount borrowed generally equals the total value of the asset purchased.

Draft - An order for the payment of money drawn by one person or bank on another. Often used in the dispersal of an operating loan to a borrower for payment of bills. Encumbrance - A claim against property or an interest in property that limits the ownership right of the property.

Examples include liens, mortgages and leases. Escrow - The process by which an agent provides safe keeping of cash, securities, documents and the handling of the paperwork and transfer of funds for the parties e. borrower and seller. Equity - The owner's capital invested in a business.

The amount by which assets exceed liabilities. For example, equity in a farm is the value of the farm less the amount owed against it. Also called owner's equity or net worth. Fees - A fixed charge or payment for services associated with a loan transaction.

Filing - Giving public notice or disclosure of a lender's security interest or assignment in collateral. Financial statement - A statement or report of the financial condition of a firm. Financial statements include the balance sheet, income statement, statement of changes in net worth and statement of cash flow.

Financing statement - A statement filed by a lender with a public official. Foreclosure - The legal process by which a lien against property is enforced through the taking and selling of the property.

Income statement - A summary of income and expenses over a given time period. In addition to cash income and expenses, it takes into account non-cash expenses like depreciation. Interest - A charge paid for the use of someone else's money.

It includes three things:. Interest calculations - There are a number of methods for calculating interest charges. Several of the more commonly used methods are:. Leverage - The use of borrowed money to enlarge the size of a business. Because the return to borrowed money is fixed interest rate , the rate of return profit or loss to equity capital is magnified.

It is used when the returns from using additional money is expected to be greater than the cost of borrowing it. Legal lending limit - A legal limit on the total amount of loans and commitments a financial institution can have outstanding to any one borrower.

The limit usually is determined as a specified percentage of the financial institution's own net worth or equity capital. Loan terms refer to the various parts of the loan like the interest rate, penalty fees, repayment schedule, etc.

The loan term, singular, refers to the length of time that you have to repay the loan. Loan terms can significantly impact how much you pay on your loan over time, so familiarize yourself with the terms early.

If you are working with a lender, ask how the terms could be altered to be more favorable—that could be a reduction in interest rate, elimination of fees, or shortening of the repayment period.

No matter what, know what you're signing. The lender certainly does. Department of Education Federal Student Aid. Ford Federal Direct Loan Direct Loan Program and Federal Family Education Loan FFEL Program.

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Table of Contents Expand. Table of Contents. What Are Loan Terms? Understanding Loan Terms. Types of Loan Terms. Negotiating a Loan.

Frequently Asked Questions FAQs. The Bottom Line. Personal Finance Loans. Trending Videos. Key Takeaways Loan terms are a broad way to describe the various details of a loan, including the repayment period, monthly payments, and costs.

When applying for a loan, the lender should specify what the loan terms are before finalizing any borrowing agreement. Can I Negotiate the Terms of My Loan? Will Someone Go Over Loan Terms With Me Before Signing? Are Loan Terms and the Term of the Loan the Same Thing? As an alternative to including this statement, creditors may provide an itemization of such fees by type and amount with the early disclosures.

Any itemization provided upon the consumer's request need not include a disclosure about property insurance. A good faith estimate of the amount of fees must be provided. Creditors may provide, based on a typical or representative amount of credit, a range for such fees or state the dollar amount of such fees.

Rebates of third party fees. Even if fees imposed by third parties may be rebated, they must be disclosed. See interpretation of 40 d 8 Fees Imposed by Third Parties to Open a Plan in Supplement I.

A statement that negative amortization may occur and that negative amortization increases the principal balance and reduces the consumer's equity in the dwelling. Official interpretation of 40 d 9 Negative Amortization 1.

Disclosure required. In transactions where the minimum payment will not or may not be sufficient to cover the interest that accrues on the outstanding balance, the creditor must disclose that negative amortization will or may occur. This disclosure is required whether or not the unpaid interest is added to the outstanding balance upon which interest is computed.

A disclosure is not required merely because a loan calls for non-amortizing or partially amortizing payments. See interpretation of 40 d 9 Negative Amortization in Supplement I. Any limitations on the number of extensions of credit and the amount of credit that may be obtained during any time period, as well as any minimum outstanding balance and minimum draw requirements, stated as dollar amounts or percentages.

Official interpretation of 40 d 10 Transaction Requirements 1. A limitation on automated teller machine usage need not be disclosed under this paragraph unless that is the only means by which the consumer can obtain funds.

See interpretation of 40 d 10 Transaction Requirements in Supplement I. A statement that the consumer should consult a tax advisor regarding the deductibility of interest and charges under the plan.

For a plan in which the annual percentage rate is variable, the following disclosures, as applicable:. Official interpretation of 40 d 12 Disclosures for Variable-Rate Plans 1.

Variable-rate provisions. Sample forms in appendix G provide illustrative guidance on the variable-rate rules. See interpretation of 40 d 12 Disclosures for Variable-Rate Plans in Supplement I.

i The fact that the annual percentage rate, payment, or term may change due to the variable-rate feature. ii A statement that the annual percentage rate does not include costs other than interest. iii The index used in making rate adjustments and a source of information about the index.

iv An explanation of how the annual percentage rate will be determined, including an explanation of how the index is adjusted, such as by the addition of a margin. Official interpretation of Paragraph 40 d 12 iv 1. Determination of annual percentage rate. See interpretation of Paragraph 40 d 12 iv in Supplement I.

v A statement that the consumer should ask about the current index value, margin, discount or premium, and annual percentage rate. vi A statement that the initial annual percentage rate is not based on the index and margin used to make later rate adjustments, and the period of time such initial rate will be in effect.

vii The frequency of changes in the annual percentage rate. viii Any rules relating to changes in the index value and the annual percentage rate and resulting changes in the payment amount, including, for example, an explanation of payment limitations and rate carryover.

Official interpretation of Paragraph 40 d 12 viii 1. Preferred-rate provisions. This paragraph requires disclosure of preferred-rate provisions, where the rate will increase upon the occurrence of some event, such as the borrower-employee leaving the creditor's employ or the consumer closing an existing deposit account with the creditor.

Provisions on conversion to fixed rates. The commentary to § See interpretation of Paragraph 40 d 12 viii in Supplement I. ix A statement of any annual or more frequent periodic limitations on changes in the annual percentage rate or a statement that no annual limitation exists , as well as a statement of the maximum annual percentage rate that may be imposed under each payment option.

Official interpretation of Paragraph 40 d 12 ix 1. Periodic limitations on increases in rates. The creditor must disclose any annual limitations on increases in the annual percentage rate. If the creditor bases its rate limitation on 12 monthly billing cycles, such a limitation should be treated as an annual cap.

Rate limitations imposed on less than an annual basis must be stated in terms of a specific amount of time. For example, if the creditor imposes rate limitations on only a semiannual basis, this must be expressed as a rate limitation for a six-month time period.

If the creditor does not impose periodic limitations annual or shorter on rate increases, the fact that there are no annual rate limitations must be stated.

Maximum limitations on increases in rates. The maximum annual percentage rate that may be imposed under each payment option over the term of the plan including the draw period and any repayment period provided for in the initial agreement must be provided. If an initial discount is not taken into account in applying maximum rate limitations, that fact must be disclosed.

If separate overall limitations apply to rate increases resulting from events such as the exercise of a fixed-rate conversion option or leaving the creditor's employ, those limitations also must be stated.

Limitations do not include legal limits in the nature of usury or rate ceilings under state or Federal statutes or regulations. The creditor need not disclose each periodic or maximum rate limitation that is currently available. Instead, the creditor may disclose the range of the lowest and highest periodic and maximum rate limitations that may be applicable to the creditor's home equity plans.

Creditors using this alternative must include a statement that the consumer should inquire about the rate limitations that are currently available.

See interpretation of Paragraph 40 d 12 ix in Supplement I. Official interpretation of Paragraph 40 d 12 x 1. Maximum rate payment example. In calculating the payment creditors should assume the maximum rate is in effect. Any discounted or premium initial rates or periodic rate limitations should be ignored for purposes of this disclosure.

If a range is used to disclose the maximum cap under § As an alternative to making disclosures based on each payment option, the creditor may choose a representative example within the three categories of payment options upon which to base this disclosure.

However, separate examples must be provided for the draw period and for any repayment period unless the payment is determined the same way in both periods.

Time the maximum rate could be reached. In stating the date or time when the maximum rate could be reached, creditors should assume the rate increases as rapidly as possible under the plan.

In calculating the date or time, creditors should factor in any discounted or premium initial rates and periodic rate limitations. This disclosure must be provided for the draw phase and any repayment phase. Creditors should assume the index and margin shown in the last year of the historical example or a more recent rate is in effect at the beginning of each phase.

See interpretation of Paragraph 40 d 12 x in Supplement I. The historical example shall be based on the most recent 15 years of index values selected for the same time period each year and shall reflect all significant plan terms, such as negative amortization, rate carryover, rate discounts, and rate and payment limitations, that would have been affected by the index movement during the period.

Official interpretation of Paragraph 40 d 12 xi 1. Index movement. Index values and annual percentage rates must be shown for the entire 15 years of the historical example and must be based on the most recent 15 years. The example must be updated annually to reflect the most recent 15 years of index values as soon as reasonably possible after the new index value becomes available.

If the values for an index have not been available for 15 years, a creditor need only go back as far as the values have been available and may start the historical example at the year for which values are first available.

Selection of index values. The historical example must reflect the method of choosing index values for the plan. For example, if an average of index values is used in the plan, averages must be used in the example, but if an index value as of a particular date is used, a single index value must be shown.

The creditor is required to assume one date or one period, if an average is used within a year on which to base the history of index values.

The creditor may choose to use index values as of any date or period as long as the index value as of this date or period is used for each year in the example. Only one index value per year need be shown, even if the plan provides for adjustments to the annual percentage rate or payment more than once in a year.

In such cases, the creditor can assume that the index rate remained constant for the full year for the purpose of calculating the annual percentage rate and payment. Selection of margin. A value for the margin must be assumed in order to prepare the example.

A creditor may select a representative margin that it has used with the index during the six months preceding preparation of the disclosures and state that the margin is one that it has used recently.

The margin selected may be used until the creditor annually updates the disclosure form to reflect the most recent 15 years of index values. Amount of discount or premium. In reflecting any discounted or premium initial rate, the creditor may select a discount or premium that it has used during the six months preceding preparation of the disclosures, and should disclose that the discount or premium is one that the creditor has used recently.

The discount or premium should be reflected in the example for as long as it is in effect. The creditor may assume that a discount or premium that would have been in effect for any part of a year was in effect for the full year for purposes of reflecting it in the historical example. Rate limitations.

Limitations on both periodic and maximum rates must be reflected in the historical example. If ranges of rate limitations are provided under § Rate limitations that may apply more often than annually should be treated as if they were annual limitations. Assumed advances. As discussed in the commentary to § Representative payment options.

The creditor need not provide an historical example for all of its various payment options, but may select a representative payment option within each of the three categories of payments upon which to base its disclosure.

Payment information. The payment figures in the historical example must reflect all significant program terms. For example, features such as rate and payment caps, a discounted initial rate, negative amortization, and rate carryover must be taken into account in calculating the payment figures if these would have applied to the plan.

The historical example should include payments for as much of the length of the plan as would occur during a year period. For example:. If the draw period is 10 years and the repayment period is 15 years, the example should illustrate the entire year draw period and the first 5 years of the repayment period.

If the length of the draw period is 15 years and there is a year repayment phase, the historical example must reflect the payments for the year draw period and would not show any of the repayment period. No additional historical example would be required to reflect payments for the repayment period.

If the length of the plan is less than 15 years, payments in the historical example need only be shown for the number of years in the term. In such cases, however, the creditor must show the index values, margin and annual percentage rates and continue to reflect all significant plan terms such as rate limitations for the entire 15 years.

A creditor need show only a single payment per year in the example, even though payments may vary during a year. The calculations should be based on the actual payment computation formula, although the creditor may assume that all months have an equal number of days.

The creditor may assume that payments are made on the last day of the billing cycle, the billing date or the payment due date, but must be consistent in the manner in which the period used to illustrate payment information is selected.

Information about balloon payments and remaining balance may, but need not, be reflected in the example. Disclosures for repayment period. The historical example must reflect all features of the repayment period, including the appropriate index values, margin, rate limitations, length of the repayment period, and payments.

For example, if different indices are used during the draw and repayment periods, the index values for that portion of the 15 years that reflect the repayment period must be the values for the appropriate index.

The historical example for reverse mortgages should reflect 15 years of index values and annual percentage rates, but the payment column should be blank until the year that the single payment will be made, assuming that payment is estimated to occur within 15 years.

See interpretation of Paragraph 40 d 12 xi in Supplement I. xii A statement that rate information will be provided on or with each periodic statement. e Brochure.

Official interpretation of 40 e Brochure 1. Creditors are permitted to provide more detailed information than is contained in that brochure. Effect of third party delivery of brochure. If a creditor determines that a third party has provided a consumer with the required brochure pursuant to § See interpretation of 40 e Brochure in Supplement I.

f Limitations on home equity plans. No creditor may, by contract or otherwise:. Official interpretation of 40 f Limitations on Home Equity Plans 1. The limitations apply to the draw period and any repayment period, and to any renewal or modification of the original agreement.

See interpretation of 40 f Limitations on Home Equity Plans in Supplement I. Official interpretation of Paragraph 40 f 1 1.

External index. A creditor may change the annual percentage rate for a plan only if the change is based on an index outside the creditor's control.

Thus, a creditor may not make rate changes based on its own prime rate or cost of funds and may not reserve a contractual right to change rates at its discretion.

A creditor is permitted, however, to use a published prime rate, such as that in the Wall Street Journal, even if the bank's own prime rate is one of several rates used to establish the published rate.

Publicly available. The index must be available to the public. A publicly available index need not be published in a newspaper, but it must be one the consumer can independently obtain by telephone, for example and use to verify rates imposed under the plan.

Provisions not prohibited. This paragraph does not prohibit rate changes that are specifically set forth in the agreement. For example, stepped-rate plans, in which specified rates are imposed for specified periods, are permissible.

In addition, preferred-rate provisions, in which the rate increases by a specified amount upon the occurrence of a specified event, also are permissible. See interpretation of Paragraph 40 f 1 in Supplement I. i Such change is based on an index that is not under the creditor's control; and.

ii Such index is available to the general public. Official interpretation of Paragraph 40 f 2 1. Limitations on termination and acceleration. In general, creditors are prohibited from terminating and accelerating payment of the outstanding balance before the scheduled expiration of a plan.

However, creditors may take these actions in the four circumstances specified in § Creditors are not permitted to specify in their contracts any other events that allow termination and acceleration beyond those permitted by the regulation.

Thus, for example, an agreement may not provide that the balance is payable on demand nor may it provide that the account will be terminated and the balance accelerated if the rate cap is reached. Other actions permitted.

If an event permitting termination and acceleration occurs, a creditor may instead take actions short of terminating and accelerating. For example, a creditor could temporarily or permanently suspend further advances, reduce the credit limit, change the payment terms, or require the consumer to pay a fee.

A creditor also may provide in its agreement that a higher rate or higher fees will apply in circumstances under which it would otherwise be permitted to terminate the plan and accelerate the balance.

A creditor that does not immediately terminate an account and accelerate payment or take another permitted action may take such action at a later time, provided one of the conditions permitting termination and acceleration exists at that time. See interpretation of Paragraph 40 f 2 in Supplement I.

i There is fraud or material misrepresentation by the consumer in connection with the plan;. Official interpretation of Paragraph 40 f 2 i 1. Fraud or material misrepresentation. A creditor may terminate a plan and accelerate the balance if there has been fraud or material misrepresentation by the consumer in connection with the plan.

This exception includes fraud or misrepresentation at any time, either during the application process or during the draw period and any repayment period. What constitutes fraud or misrepresentation is determined by applicable state law and may include acts of omission as well as overt acts, as long as any necessary intent on the part of the consumer exists.

See interpretation of Paragraph 40 f 2 i in Supplement I. ii The consumer fails to meet the repayment terms of the agreement for any outstanding balance;. Official interpretation of Paragraph 40 f 2 ii 1. Failure to meet repayment terms. A creditor may terminate a plan and accelerate the balance when the consumer fails to meet the repayment terms provided for in the agreement.

However, a creditor may terminate and accelerate under this provision only if the consumer actually fails to make payments. For example, a creditor may not terminate and accelerate if the consumer, in error, sends a payment to the wrong location, such as a branch rather than the main office of the creditor.

If a consumer files for or is placed in bankruptcy, the creditor may terminate and accelerate under this provision if the consumer fails to meet the repayment terms of the agreement. This section does not override any state or other law that requires a right-to-cure notice, or otherwise places a duty on the creditor before it can terminate a plan and accelerate the balance.

See interpretation of Paragraph 40 f 2 ii in Supplement I. iii Any action or inaction by the consumer adversely affects the creditor's security for the plan, or any right of the creditor in such security; or.

Official interpretation of Paragraph 40 f 2 iii 1. Impairment of security. A creditor may terminate a plan and accelerate the balance if the consumer's action or inaction adversely affects the creditor's security for the plan, or any right of the creditor in that security. Action or inaction by third parties does not, in itself, permit the creditor to terminate and accelerate.

A creditor may terminate and accelerate, for example, if:. The consumer transfers title to the property or sells the property without the permission of the creditor.

The consumer fails to maintain required insurance on the dwelling. The consumer fails to pay taxes on the property. The consumer permits the filing of a lien senior to that held by the creditor. The sole consumer obligated on the plan dies. The property is taken through eminent domain. A prior lienholder forecloses.

By contrast, the filing of a judgment against the consumer would permit termination and acceleration only if the amount of the judgment and collateral subject to the judgment is such that the creditor's security is adversely affected.

If the consumer commits waste or otherwise destructively uses or fails to maintain the property such that the action adversely affects the security, the plan may be terminated and the balance accelerated.

Illegal use of the property by the consumer would permit termination and acceleration if it subjects the property to seizure. If one of two consumers obligated on a plan dies the creditor may terminate the plan and accelerate the balance if the security is adversely affected.

If the consumer moves out of the dwelling that secures the plan and that action adversely affects the security, the creditor may terminate a plan and accelerate the balance. See interpretation of Paragraph 40 f 2 iii in Supplement I.

iv Federal law dealing with credit extended by a depository institution to its executive officers specifically requires that as a condition of the plan the credit shall become due and payable on demand, provided that the creditor includes such a provision in the initial agreement.

Official interpretation of Paragraph 40 f 3 1. Scope of provision. In general, a creditor may not change the terms of a plan after it is opened. For example, a creditor may not increase any fee or impose a new fee once the plan has been opened, even if the fee is charged by a third party, such as a credit reporting agency, for a service.

The change of terms prohibition applies to all features of a plan, not only those required to be disclosed under this section. For example, this provision applies to charges imposed for late payment, although this fee is not required to be disclosed under § Charges not covered.

There are three charges not covered by this provision. A creditor may pass on increases in taxes since such charges are imposed by a governmental body and are beyond the control of the creditor. In addition, a creditor may pass on increases in premiums for property insurance that are excluded from the finance charge under § A creditor also may pass on increases in premiums for credit insurance that are excluded from the finance charge under § See interpretation of Paragraph 40 f 3 in Supplement I.

i Provide in the initial agreement that it may prohibit additional extensions of credit or reduce the credit limit during any period in which the maximum annual percentage rate is reached.

A creditor also may provide in the initial agreement that specified changes will occur if a specified event takes place for example, that the annual percentage rate will increase a specified amount if the consumer leaves the creditor's employment.

Official interpretation of Paragraph 40 f 3 i 1. Changes provided for in agreement. A creditor may provide in the initial agreement that further advances will be prohibited or the credit line reduced during any period in which the maximum annual percentage rate is reached.

A creditor also may provide for other specific changes to take place upon the occurrence of specific events. Both the triggering event and the resulting modification must be stated with specificity. For example, in home equity plans for employees, the agreement could provide that a specified higher rate or margin will apply if the borrower's employment with the creditor ends.

A contract could contain a stepped-rate or stepped-fee schedule providing for specified changes in the rate or the fees on certain dates or after a specified period of time. A creditor also may provide in the initial agreement that it will be entitled to a share of the appreciation in the value of the property as long as the specific appreciation share and the specific circumstances which require the payment of it are set forth.

A contract may permit a consumer to switch among minimum payment options during the plan. Prohibited provisions. A creditor may not include a general provision in its agreement permitting changes to any or all of the terms of the plan. For example, an agreement may not provide that the margin in a variable-rate plan will increase if there is a material change in the consumer's financial circumstances, because the regulation specifies that temporarily freezing the line or lowering the credit limit is the permissible response to a material change in the consumer's financial circumstances.

Similarly a contract cannot contain a provision allowing the creditor to freeze a line due to an insignificant decline in property value since the regulation allows that response only for a significant decline. See interpretation of Paragraph 40 f 3 i in Supplement I.

Official interpretation of Paragraph 40 f 3 ii 1. Replacing LIBOR. A creditor may use either the provision in § Neither provision, however, excuses the creditor from noncompliance with contractual provisions.

The following examples illustrate when a creditor may use the provisions in § Assume that LIBOR becomes unavailable after June 30, , and assume a contract provides that a creditor may not replace an index unilaterally under a plan unless the original index becomes unavailable and provides that the replacement index and replacement margin will result in an annual percentage rate substantially similar to a rate that is in effect when the original index becomes unavailable.

In this case, the creditor may use § If the replacement index is not published on October 18, , the creditor generally must use the next calendar day for which both the LIBOR index and the replacement index are published as the date for selecting indices values in determining whether the annual percentage rate based on the replacement index is substantially similar to the rate based on the LIBOR index.

The one exception is that if the replacement index is the spread-adjusted index based on SOFR recommended by the Alternative Reference Rates Committee for consumer products to replace the 1-month, 3-month, 6-month, or 1-year U.

Dollar LIBOR index, the creditor must use the index value on June 30, , for the LIBOR index and, for the SOFR-based spread-adjusted index for consumer products, must use the index value on the first date that index is published, in determining whether the annual percentage rate based on the replacement index is substantially similar to the rate based on the LIBOR index.

In this example, however, the creditor would be contractually prohibited from replacing the LIBOR index used under the plan unless the replacement index and replacement margin also will produce an annual percentage rate substantially similar to a rate that is in effect when the LIBOR index becomes unavailable.

Assume that LIBOR becomes unavailable after June 30, , and assume a contract provides that a creditor may not replace an index unilaterally under a plan unless the original index becomes unavailable but does not require that the replacement index and replacement margin will result in an annual percentage rate substantially similar to a rate that is in effect when the original index becomes unavailable.

In this case, the creditor would be contractually prohibited from unilaterally replacing a LIBOR index used under the plan until it becomes unavailable. At that time, the creditor has the option of using § Assume that LIBOR becomes unavailable after June 30, , and assume a contract provides that a creditor may change the terms of the contract including the index as permitted by law.

In this case, if the creditor replaces a LIBOR index under a plan on or after April 1, , but does not wait until the LIBOR index becomes unavailable to do so, the creditor may only use § In this case, the creditor may not use § If the creditor waits until the LIBOR index used under the plan becomes unavailable to replace the LIBOR index, the creditor has the option of using §

Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge

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Understanding loan covenants, when financial institutions should use them, and how to monitor them supports strong lending portfolios Increasing the maximum term limit to months will allow mortgagees to further reduce the borrower's monthly payment as the outstanding (i) Provide in the initial agreement that it may prohibit: Increased control over loan terms and conditions

Promissory notes resemble loan agreements but are Increased control over loan terms and conditions complicated. Official voer of Paragraph 40 termw 5 ii. Preferred-rate plans. If changes may occur pursuant to § Assume that a creditor extended during a first-lien covered transaction that is secured by a property located in a rural or underserved area.	Principal: Definition in Loans, Bonds, Investments, and Transactions Principal is the money lent to a borrower or put into an investment. vi New manufactured home means a manufactured home that has not been previously occupied. Refinancing: The process of paying off an existing loan and establishing a new loan. Dollar LIBOR index, the creditor must use the index value on June 30, , for the LIBOR index and, for the SOFR-based spread-adjusted index for consumer products, must use the index value on the first date that index is published, in determining whether the annual percentage rate based on the replacement index is substantially similar to the rate based on the LIBOR index. Changes provided for in agreement. Collection of fees before consumer receives disclosures. The historical example should include payments for as much of the length of the plan as would occur during a year period.	Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge	Availability. Subject to the terms and conditions of this Agreement, Lender agrees to make to Borrower an advance on the Closing Date in principal amount equal Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment Adjustable rate loan - An adjustable rate loan has provisions to change the interest rate at pre-specified points in time based on changes in a market index, a	Loan terms refer to the terms and conditions involved when borrowing money. This can include the loan's repayment period, the interest rate and fees Missing Increasing the maximum term limit to months will allow mortgagees to further reduce the borrower's monthly payment as the outstanding
You generally Credit score improvement advice extend your loan's Increased control over loan terms and conditions whenever you Increases or on condktions own. Official interpretation of 35 c 3 snd In General ckntrol. All assets are reported on a balance sheet ovfr market or cost value less accumulated depreciation. SBA capped fees that lenders could charge applicants Lenders were prohibited from charging flat fees and completed Form for all loans Lenders were not clear on incorporating technology service fees. The effect of exercising the option should not be reflected elsewhere in the disclosures, such as in the historical example required in § Census Bureau using the latest decennial census of the United States. Manner of describing fees.	SBA is responsible for determining eligibility for all loans based on ETRAN data submissions, and SBA will not repair or deny a guaranty purchase request for eligibility if SBA determined the borrower eligible. Metropolitan statistical areas and micropolitan statistical areas are defined by the Office of Management and Budget and applied under currently applicable Urban Influence Codes UICs , established by the United States Department of Agriculture's Economic Research Service USDA-ERS. A borrower of a loan made under this part may consolidate such loan with the loans described in section —3 a 4 of this title , including any loan made under part B and first disbursed before July 1, In the interim, the Coronavirus Aid, Relief, and Economic Security Act [ Pub. Security agreement - A legal instrument signed by a debtor granting a security interest to a lender in specified personal property pledged as collateral to secure a loan. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly. Assume that LIBOR becomes unavailable after June 30, , and assume a contract provides that a creditor may not replace an index unilaterally under a plan unless the original index becomes unavailable but does not require that the replacement index and replacement margin will result in an annual percentage rate substantially similar to a rate that is in effect when the original index becomes unavailable.	Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge	Risk management programs for IDIs that originate or arrange leveraged loans or participate in a large volume of leveraged loans should be more Availability. Subject to the terms and conditions of this Agreement, Lender agrees to make to Borrower an advance on the Closing Date in principal amount equal Institutions should assess thoroughly and understand all the terms, conditions, and limitations of the loan purchase or participation	Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge
Ford Federal Direct Inccreased Direct Loan Termw and Rapid fund transfers Family Education Loan FFEL Program. Refinancing: The process of paying off Increaaed existing loan and establishing a new loan. Permissible use of proceeds. Exception for post-consummation escrow accounts for distressed consumers. ii In addition, preferred-rate provisions, in which the rate increases by a specified amount upon the occurrence of a specified event, also are permissible.	Usually used in reference to the completion of a real estate transaction that transfers rights of ownership in exchange for monetary considerations. C The transaction satisfies the criteria in paragraphs b 2 iii A and b 2 iii D of this section. This individual serves as the primary contact at the campus level for loan applicants. The fee is usually expressed as a percentage of the loan commitment. Information about balloon payments and remaining balance may, but need not, be reflected in the example.	Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge	If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate An unconditional guarantee may be in the form of a repurchase agreement or separate guarantee agreement. A condition reasonably within the power of the bank or	Understanding loan covenants, when financial institutions should use them, and how to monitor them supports strong lending portfolios Institutions should assess thoroughly and understand all the terms, conditions, and limitations of the loan purchase or participation Availability. Subject to the terms and conditions of this Agreement, Lender agrees to make to Borrower an advance on the Closing Date in principal amount equal

Increased control over loan terms and conditions - Increasing the maximum term limit to months will allow mortgagees to further reduce the borrower's monthly payment as the outstanding Quick Answer. Extending your loan's term gives you more time to pay off the debt and may lower your monthly payment (1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate If the requested change impacts credit terms or settlement and causes an estimated charge to increase, a revised loan estimate may be issued to reset the charge

A creditor meets the rural-or-underserved test for any higher-priced mortgage loan consummated during a calendar year if it extended a first-lien covered transaction in the preceding calendar year secured by a property located in a rural-or-underserved area. If the creditor does not meet the rural-or-underserved test in the preceding calendar year, the creditor meets this condition for a higher-priced mortgage loan consummated during the current calendar year only if the application for the loan was received before April 1 of the current calendar year and the creditor extended a first-lien covered transaction during the next-to-last calendar year that is secured by a property located in a rural or underserved area.

The following examples are illustrative:. Assume that a creditor extended during a first-lien covered transaction that is secured by a property located in a rural or underserved area. Because the creditor extended a first-lien covered transaction during that is secured by a property located in a rural or underserved area, the creditor can meet this condition for exemption for any higher-priced mortgage loan consummated during Assume that a creditor did not extend during a first-lien covered transaction secured by a property that is located in a rural or underserved area.

Assume further that the same creditor extended during a first-lien covered transaction that is located in a rural or underserved area.

Assume further that the creditor consummates a higher-priced mortgage loan in for which the application was received in November Because the creditor did not extend during a first-lien covered transaction secured by a property that is located in a rural or underserved area, and the application was received on or after April 1, , the creditor does not meet this condition for exemption.

However, assume instead that the creditor consummates a higher-priced mortgage loan in based on an application received in February The creditor meets this condition for exemption for this loan because the application was received before April 1, , and the creditor extended during a first-lien covered transaction that is located in a rural or underserved area.

The creditor and its affiliates together extended no more than 2, covered transactions, as defined in § For purposes of § In general, whether this condition is satisfied depends on the creditor's activity during the preceding calendar year.

However, if the application for the loan in question is received before April 1 of the current calendar year, the creditor may instead meet this condition based on activity during the next-to-last calendar year. This provides creditors with a grace period if their activity falls at or below the threshold in one calendar year but exceeds it in the next calendar year.

For example, assume that in a creditor and its affiliates together extended 1, loans that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, and 2, such loans in Because the transaction activity exceeds the threshold but the transaction activity does not, the creditor satisfies this condition for exemption for a higher-priced mortgage loan consummated during if the creditor received the application for the loan before April 1, , but does not satisfy this condition for a higher-priced mortgage loan consummated during if the application for the loan was received on or after April 1, As of the end of the preceding calendar year, or as of the end of either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year, the creditor and its affiliates that regularly extended covered transactions secured by first liens, together, had total assets that are less than the applicable annual asset threshold.

See comment 35 b 2 iii Only the assets of a creditor's affiliate that regularly extended first-lien covered transactions during the applicable period are included in calculating the creditor's assets.

Also consistent with § Thus, if a creditor's affiliate regularly extended first-lien covered transactions during the preceding calendar year, the creditor's assets as of the end of the preceding calendar year, for purposes of the asset limit, take into account the assets of that affiliate.

If the creditor, together with its affiliates that regularly extended first-lien covered transactions, exceeded the asset limit in the preceding calendar year - to be eligible to operate as a small creditor for transactions with applications received before April 1 of the current calendar year - the assets of the creditor's affiliates that regularly extended covered transactions in the year before the preceding calendar year are included in calculating the creditor's assets.

Further, because the co-owner and the company are mutual affiliates the company also would count all of the co-owner's assets towards its own asset limit. A creditor satisfies the criterion in § A creditor that together with its affiliates that regularly extended first-lien covered transactions did not meet the applicable asset threshold on December 31, satisfies this criterion for a higher-priced mortgage loan consummated during if the application for the loan was received before April 1, and the creditor together with its affiliates that regularly extended first-lien covered transactions had total assets of less than the applicable asset threshold on December 31, The Bureau will publish notice of the asset threshold each year by amending this comment.

For historical purposes:. The creditor and its affiliates do not maintain an escrow account for any mortgage transaction being serviced by the creditor or its affiliate at the time the transaction is consummated, except as provided in § Thus, the exemption applies, provided the other conditions of § Once a creditor or its affiliate begins escrowing for loans currently serviced other than those addressed in § Thus, as long as a creditor or its affiliate services and maintains escrow accounts for any mortgage loans, other than as provided in § See interpretation of Paragraph 35 b 2 iii.

A During the preceding calendar year, or, if the application for the transaction was received before April 1 of the current calendar year, during either of the two preceding calendar years, the creditor extended a covered transaction, as defined by § B During the preceding calendar year, or, if the application for the transaction was received before April 1 of the current calendar year, during either of the two preceding calendar years, the creditor and its affiliates together extended no more than 2, covered transactions, as defined by § C As of the preceding December 31st, or, if the application for the transaction was received before April 1 of the current calendar year, as of either of the two preceding December 31sts, the creditor and its affiliates that regularly extended covered transactions, as defined by § iii for the applicable threshold ; and.

D Neither the creditor nor its affiliate maintains an escrow account of the type described in paragraph b 1 of this section for any extension of consumer credit secured by real property or a dwelling that the creditor or its affiliate currently services, other than:.

Official interpretation of Paragraph 35 b 2 iii D 1. Exception for certain accounts. Escrow accounts established for first-lien higher-priced mortgage loans for which applications were received on or after April 1, , and before June 17, , are not counted for purposes of § For applications received on and after June 17, , creditors, together with their affiliates, that establish new escrow accounts, other than those described in § Creditors, together with their affiliates, that continue to maintain escrow accounts established for first-lien higher-priced mortgage loans for which applications were received on or after April 1, , and before June 17, , still qualify for the exemptions provided under § See interpretation of Paragraph 35 b 2 iii D 1.

Official interpretation of Paragraph 35 b 2 iii D 2. Exception for post-consummation escrow accounts for distressed consumers. An escrow account established after consummation for a distressed consumer does not count for purposes of § Distressed consumers are consumers who are working with the creditor or servicer to attempt to bring the loan into a current status through a modification, deferral, or other accommodation to the consumer.

A creditor, together with its affiliates, that establishes escrow accounts after consummation as a regular business practice, regardless of whether consumers are in distress, does not qualify for the exception described in § See interpretation of Paragraph 35 b 2 iii D 2.

iv For purposes of paragraph b 2 iii A of this section:. Official interpretation of Paragraph 35 b 2 iv. A creditor's extensions of covered transactions, as defined by § Census Bureau using the latest decennial census of the United States.

Metropolitan statistical areas and micropolitan statistical areas are defined by the Office of Management and Budget and applied under currently applicable Urban Influence Codes UICs , established by the United States Department of Agriculture's Economic Research Service USDA-ERS.

A county for which there is no currently applicable UIC because the county has been created since the USDA-ERS last categorized counties is a rural area only if all counties from which the new county's land was taken are themselves rural under currently applicable UICs. If a county satisfies either test, the Bureau will include the county on a list of counties that are rural or underserved as defined by § To facilitate compliance with appraisal requirements in § To the extent that U.

territories are treated by the Census Bureau as counties and are neither metropolitan statistical areas nor micropolitan statistical areas adjacent to metropolitan statistical areas, such territories will be included on these lists as rural areas in their entireties. The Bureau will post on its public Web site the applicable lists for each calendar year by the end of that year to assist creditors in ascertaining the availability to them of the exemption during the following year.

Any county that the Bureau includes on these lists of counties that are rural or underserved under the Bureau's definitions for a particular year is deemed to qualify as a rural or underserved area for that calendar year for purposes of § A property located in such a listed county is deemed to be located in a rural or underserved area, even if the census block in which the property is located is designated as urban.

A property is deemed to be in a rural or underserved area according to the definitions in § The U. Census Bureau may provide on its public Web site an automated address search tool that specifically indicates if a property is located in an urban area for purposes of the Census Bureau's most recent delineation of urban areas.

For any calendar year that began after the date on which the Census Bureau announced its most recent delineation of urban areas, a property is deemed to be in a rural area if the search results provided for the property by any such automated address search tool available on the Census Bureau's public Web site do not designate the property as being in an urban area.

For a given calendar year, a property qualifies for a safe harbor if any of the enumerated safe harbors affirms that the property is in a rural or underserved area or not in an urban area. For example, the Census Bureau's automated address search tool may indicate a property is in an urban area, but the Bureau's rural or underserved counties list indicates the property is in a rural or underserved county.

The property in this example is in a rural or underserved area because it qualifies under the safe harbor for the rural or underserved counties list. The lists of counties posted on the Bureau's public Web site, the automated tool on its public Web site, and the automated address search tool available on the Census Bureau's public Web site, are not the exclusive means by which a creditor can demonstrate that a property is in a rural or underserved area as defined in § Census Bureau that are available at the beginning of the calendar year.

These designations and delineations are updated by the USDA-ERS and the U. Census Bureau respectively once every ten years.

As an example, assume a creditor makes first-lien covered transactions in Census Block X that is located in County Y during calendar year As of January 1, , the most recent UIC designations were published in the second quarter of , and the most recent delineation of urban areas was announced in the Federal Register in , see U.

Census Bureau, Qualifying Urban Areas for the Census, 77 FR Mar. To determine whether County Y is rural under the Bureau's definition during calendar year , the creditor can use USDA-ERS's UIC designations.

If County Y is not rural, the creditor can use the U. For example, assume a creditor makes first-lien covered transactions in County Y during calendar year , and the most recent HMDA data are for calendar year , published in the third quarter of See interpretation of Paragraph 35 b 2 iv.

Office of Management and Budget and as they are applied under currently applicable Urban Influence Codes UICs , established by the United States Department of Agriculture's Economic Research Service USDA-ERS ; or.

C A property shall be deemed to be in an area that is rural or underserved in a particular calendar year if the property is:. Census Bureau provides on its public Web site for that purpose and that specifically indicates the urban or rural designations of properties. v Notwithstanding paragraphs b 2 iii and b 2 vi of this section, an escrow account must be established pursuant to paragraph b 1 of this section for any first-lien higher-priced mortgage loan that, at consummation, is subject to a commitment to be acquired by a person that does not satisfy the conditions in paragraphs b 2 iii or b 2 vi of this section, unless otherwise exempted by this paragraph b 2.

Official interpretation of Paragraph 35 b 2 v. Forward commitments. A creditor may make a mortgage loan that will be transferred or sold to a purchaser pursuant to an agreement that has been entered into at or before the time the loan is consummated.

The escrow requirement applies to any such transaction, whether the forward commitment provides for the purchase and sale of the specific transaction or for the purchase and sale of mortgage obligations with certain prescribed criteria that the transaction meets.

For example, assume a creditor that qualifies for an exemption in § If the investor is ineligible for an exemption in § See interpretation of Paragraph 35 b 2 v.

vi Except as provided in paragraph b 2 v of this section, an escrow account need not be established for a transaction made by a creditor that is an insured depository institution or insured credit union, if at the time of consummation:.

Official interpretation of Paragraph 35 b 2 vi. For guidance on applying the grace periods for determining asset size or transaction thresholds under § See interpretation of Paragraph 35 b 2 vi.

Official interpretation of Paragraph 35 b 2 vi A. The asset threshold in § Unlike the asset threshold in § Creditors that had total assets of 10,,, or less on December 31, , satisfied this criterion for purposes of any loan consummated in and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in for which the application was received before April 1, See interpretation of Paragraph 35 b 2 vi A.

B During the preceding calendar year, or, if the application for the transaction was received before April 1 of the current calendar year, during either of the two preceding calendar years, the creditor and its affiliates, as defined in § Official interpretation of Paragraph 35 b 2 vi B.

The transaction threshold in § First, the threshold in § Second, all loans made by the creditor and its affiliates secured by a first lien on a principal dwelling count toward the 1, loan threshold in § By contrast, under § See interpretation of Paragraph 35 b 2 vi B.

C The transaction satisfies the criteria in paragraphs b 2 iii A and b 2 iii D of this section. Official interpretation of 35 b 3 Cancellation. Termination of underlying debt obligation. Methods by which an underlying debt obligation may be terminated include, among other things, repayment, refinancing, rescission, and foreclosure.

Minimum durations. This requirement does not affect a creditor's right or obligation, pursuant to the terms of the legal obligation or applicable law, to offer or require an escrow account thereafter.

Less than eighty percent unpaid principal balance. In determining whether the unpaid principal balance has reached less than 80 percent of the original value of the property securing the underlying debt, the creditor or servicer shall count any subordinate lien of which it has reason to know.

If the consumer certifies in writing that the equity in the property securing the underlying debt obligation is unencumbered by a subordinate lien, the creditor or servicer may rely upon the certification in making its determination unless it has actual knowledge to the contrary.

See interpretation of 35 b 3 Cancellation. i General. Except as provided in paragraph b 3 ii of this section, a creditor or servicer may cancel an escrow account required in paragraph b 1 of this section only upon the earlier of:. A Termination of the underlying debt obligation; or. B Receipt no earlier than five years after consummation of a consumer's request to cancel the escrow account.

ii Delayed cancellation. Notwithstanding paragraph b 3 i of this section, a creditor or servicer shall not cancel an escrow account pursuant to a consumer's request described in paragraph b 3 i B of this section unless the following conditions are satisfied:.

A The unpaid principal balance is less than 80 percent of the original value of the property securing the underlying debt obligation; and. B The consumer currently is not delinquent or in default on the underlying debt obligation. Official interpretation of 35 c - Appraisals See interpretation of 35 c - Appraisals in Supplement I.

Official interpretation of 35 c 1 Definitions See interpretation of 35 c 1 Definitions in Supplement I. i Certified or licensed appraiser means a person who is certified or licensed by the State agency in the State in which the property that secures the transaction is located, and who performs the appraisal in conformity with the Uniform Standards of Professional Appraisal Practice and the requirements applicable to appraisers in title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of , as amended 12 U.

Official interpretation of 35 c 1 i Certified or Licensed Appraiser 1. The Uniform Standards of Professional Appraisal Practice USPAP are established by the Appraisal Standards Board of the Appraisal Foundation as defined in 12 U.

Appraiser's certification. The appraiser's certification refers to the certification that must be signed by the appraiser for each appraisal assignment. This requirement is specified in USPAP Standards Rule FIRREA title XI and implementing regulations.

The relevant regulations are those prescribed under section of the Financial Institutions Reform, Recovery, and Enforcement Act of FIRREA , as amended 12 U. Paragraph 3 of FIRREA section 12 U. See interpretation of 35 c 1 i Certified or Licensed Appraiser in Supplement I. ii Credit risk means the financial risk that a consumer will default on a loan.

iii Manufactured home has the same meaning as in 24 CFR iv Manufacturer's invoice means a document issued by a manufacturer and provided with a manufactured home to a retail dealer that separately details the wholesale base prices at the factory for specific models or series of manufactured homes and itemized options large appliances, built-in items and equipment , plus actual itemized charges for freight from the factory to the dealer's lot or the homesite including any rental of wheels and axles and for any sales taxes to be paid by the dealer.

The invoice may recite such prices and charges on an itemized basis or by stating an aggregate price or charge, as appropriate, for each category. v National Registry means the database of information about State certified and licensed appraisers maintained by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

vi New manufactured home means a manufactured home that has not been previously occupied. Unless otherwise specified, the requirements in paragraph c 3 through 6 of this section do not apply to the following types of transactions:.

Official interpretation of 35 c 2 Exemptions 1. Compliance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of FIRREA. Institutions subject to the requirements of FIRREA and its implementing regulations that make a loan qualifying for an exemption under section See interpretation of 35 c 2 Exemptions in Supplement I.

i A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U. Official interpretation of Paragraph 35 c 2 i 1. Qualified mortgage criteria. The loan is - 1 subject to the Bureau's ability-to-repay requirements in § Department of Housing and Urban Development HUD , U.

Department of Veterans Affairs VA , U. Department of Agriculture USDA , or Rural Housing Service RHS , a qualified mortgage pursuant to applicable rules prescribed by those agencies but only once such rules are in effect; otherwise, the Bureau's definition of a qualified mortgage applies to those loans ; or.

The loan is - 1 not subject to the Bureau's ability-to-repay requirements in § To explain further, loans enumerated in § These include an extension of credit made pursuant to a program administered by a Housing Finance Agency, as defined under 24 CFR See § They also include extensions of credit made by a creditor identified in § However, these loans are eligible for the exemption in § For example, assume that HUD has prescribed rules to define loans insured under its programs that are qualified mortgages and those rules are in effect.

Assume further that a creditor designated as a Community Development Financial Institution, as defined under 12 CFR Nonetheless, the transaction is eligible for an exemption from the appraisal requirements of § Nothing in § See interpretation of Paragraph 35 c 2 i in Supplement I.

ii An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph c 2 ii ;.

Official interpretation of Paragraph 35 c 2 ii 1. Threshold amount. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers CPI-W that was in effect on the preceding June 1. Comment 35 c 2 ii -3 will be amended to provide the threshold amount for the upcoming year after the annual percentage change in the CPI-W that was in effect on June 1 becomes available.

No increase in the CPI-W. If the CPI-W in effect on June 1 does not increase from the CPI-W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change in the CPI-W applied to the dollar amount that would have resulted, after rounding, if decreases and any subsequent increases in the CPI-W had been taken into account.

Net increases. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly.

Net decreases. If the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted.

Qualifying for exemption — in general. A transaction is exempt under § Qualifying for exemption — subsequent changes. A transaction does not meet the condition for an exemption under § For example, assume a closed-end loan that qualified for a § In these circumstances, the creditor must comply with all of the applicable requirements of § See interpretation of Paragraph 35 c 2 ii in Supplement I.

iii A transaction secured by a mobile home, boat, or trailer. Official interpretation of Paragraph 35 c 2 iii 1. Secured by a mobile home. For purposes of the exemption in § See interpretation of Paragraph 35 c 2 iii in Supplement I. iv A transaction to finance the initial construction of a dwelling.

Official interpretation of Paragraph 35 c 2 iv 1. Construction-to-permanent loans. This exclusion applies to a construction-only loan as well as to the construction phase of a construction-to-permanent loan. When a construction loan may be permanently financed by the same creditor, the general disclosure requirements for closed-end credit § When the creditor discloses the two phases as separate transactions, the annual percentage rate for the permanent phase must be compared to the average prime offer rate for a transaction that is comparable to the permanent financing to determine coverage under § The annual percentage rate must be compared to the average prime offer rate for a transaction that is comparable to the permanent financing to determine coverage under § If the transaction is determined to be a higher-priced mortgage loan not otherwise exempt under § Financing initial construction.

The exemption for construction loans in § The exemption does not apply, for example, to loans to finance the purchase of manufactured homes that have not been or are in the process of being built when the financing obtained by the consumer at that time is permanent.

See interpretation of Paragraph 35 c 2 iv in Supplement I. vi A reverse-mortgage transaction subject to 12 CFR vii An extension of credit that is a refinancing secured by a first lien, with refinancing defined as in § A Either —.

Official interpretation of Paragraph 35 c 2 vii A 1 1. Same credit risk holder. The requirement that the holder of the credit risk on the existing obligation and the refinancing be the same applies to situations in which an entity bears the financial responsibility for the default of a loan by either holding the loan in its portfolio or guaranteeing payments of principal and any interest to investors in a mortgage-backed security in which the loan is pooled.

For example, a credit risk holder could be a bank that bears the credit risk on the existing obligation by holding the loan in the bank's portfolio.

Another example of a credit risk holder would be a government-sponsored enterprise that bears the risk of default on a loan by guaranteeing the payment of principal and any interest on a loan to investors in a mortgage-backed security.

The holder of credit risk under § Same credit risk holder — illustrations. The existing obligation is held in the portfolio of a bank, thus the bank holds the credit risk. The bank arranges to refinance the loan and also will hold the refinancing in its portfolio.

If the refinancing otherwise meets the requirements for an exemption under § In this case, the exemption would apply regardless of whether the bank arranged to refinance the loan directly or indirectly, such as through the servicer or subservicer on the existing obligation.

The existing obligation is held in the portfolio of a government-sponsored enterprise GSE , thus the GSE holds the credit risk. The existing obligation is then refinanced by the servicer of the loan and immediately transferred to the GSE.

The GSE pools the refinancing in a mortgage-backed security guaranteed by the GSE, thus the GSE holds the credit risk on the refinance loan. If the refinance transaction otherwise meets the requirements for an exemption under § A creditor may make a mortgage loan that will be sold or otherwise transferred pursuant to an agreement that has been entered into at or before the time the transaction is consummated.

See interpretation of Paragraph 35 c 2 vii A 1 in Supplement I. B The regular periodic payments under the refinance loan do not —.

Official interpretation of Paragraph 35 c 2 vii B 1. Regular periodic payments. Thus, the terms of the legal obligation must require the consumer to make payments of principal and interest on a monthly or other periodic basis that will repay the loan amount over the loan term. Except for payments resulting from any interest rate changes after consummation in an adjustable-rate or step-rate mortgage, the periodic payments must be substantially equal.

In addition, a single-payment transaction is not a refinancing meeting the requirements of § See interpretation of Paragraph 35 c 2 vii B in Supplement I.

C The proceeds from the refinancing are used solely to satisfy the existing obligation and amounts attributed solely to the costs of the refinancing; and. Official interpretation of Paragraph 35 c 2 vii C 1. Permissible use of proceeds. The exemption for a refinancing under § The existing obligation includes the unpaid principal balance of the existing first lien loan, any earned unpaid finance charges, and any other lawful charges related to the existing loan.

For guidance on the meaning of refinancing costs, see comment 23 f If the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the exemption for a refinancing under § For applications received on or after July 18, See interpretation of Paragraph 35 c 2 vii C in Supplement I.

viii A transaction secured by:. A A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph c 3 i of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or.

Official interpretation of Paragraph 35 c 2 viii A 1. Secured by new manufactured home and land - physical visit of the interior. A transaction secured by a new manufactured home and land is subject to the requirements of § Thus, for example, a creditor of a loan secured by a new manufactured home and land could comply with § See interpretation of Paragraph 35 c 2 viii A in Supplement I.

B A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction —.

Official interpretation of Paragraph 35 c 2 viii B 1. Secured by a manufactured home and not land. See interpretation of Paragraph 35 c 2 viii B in Supplement I. Official interpretation of Paragraph 35 c 2 viii B 2 1. A cost service provider from which the creditor obtains a manufactured home unit cost estimate under § The requirement that the cost estimate be from an independent cost service provider does not prohibit a creditor from providing a cost estimate that reflects adjustments to account for factors such as special features, condition or location.

However, the requirement that the estimate be obtained from an independent cost service provider means that any adjustments to the estimate must be based on adjustment factors available as part of the independent cost service used, with associated values that are determined by the independent cost service.

See interpretation of Paragraph 35 c 2 viii B 2 in Supplement I. Official interpretation of Paragraph 35 c 2 viii C 3 1. Interest in the property. A person has a direct or indirect in the property if, for example, the person has any ownership or reasonably foreseeable ownership interest in the manufactured home.

To illustrate, a person who seeks a loan to purchase the manufactured home to be valued has a reasonably foreseeable ownership interest in the property. Interest in the transaction. A person has a direct or indirect interest in the transaction if, for example, the person or an affiliate of that person also serves as a loan officer of the creditor or otherwise arranges the credit transaction, or is the retail dealer of the manufactured home.

A person also has a prohibited interest in the transaction if the person is compensated or otherwise receives financial or other benefits based on whether the transaction is consummated. Training in valuing manufactured homes. Training in valuing manufactured homes includes, for example, successfully completing a course in valuing manufactured homes offered by a state or national appraiser association or receiving job training from an employer in the business of valuing manufactured homes.

Manufactured home valuation — example. A valuation in compliance with § Department of Housing and Urban Development, pursuant to section 2 b 10 of the National Housing Act, 12 U.

See interpretation of Paragraph 35 c 2 viii C 3 in Supplement I. Official interpretation of 35 c 3 Appraisals Required See interpretation of 35 c 3 Appraisals Required in Supplement I.

i In general. Except as provided in paragraph c 2 of this section, a creditor shall not extend a higher-priced mortgage loan to a consumer without obtaining, prior to consummation, a written appraisal of the property to be mortgaged.

The appraisal must be performed by a certified or licensed appraiser who conducts a physical visit of the interior of the property that will secure the transaction. Official interpretation of 35 c 3 i In General 1. Written appraisal — electronic transmission. See interpretation of 35 c 3 i In General in Supplement I.

ii Safe harbor. A creditor obtains a written appraisal that meets the requirements for an appraisal required under paragraph c 3 i of this section if the creditor:. Official interpretation of 35 c 3 ii Safe Harbor. Safe harbor. A creditor that satisfies the safe harbor conditions in § A creditor that does not satisfy the safe harbor conditions in § See also comment 35 c 1 i See interpretation of 35 c 3 ii Safe Harbor.

Applicant: An eligible Appointee designated by one of the ten University campuses, Office of the President or, LBNL as eligible to apply for a loan under the UC Home Loan Program.

Application Checklist : An itemized list of documentation that the borrower and the campus need to provide to the Office of Loan Programs for either pre-approval or loan approval.

Also known as form OLP Appointee: A person who has been offered and has accepted a full-time position with the University of California. Appraised Value: The dollar value assigned to a single-family residence by an appraiser approved by the Office of Loan Programs. Automated Clearinghouse ACH : An electronic funds transfer network that enables direct money transfers between participating bank accounts and lenders.

This feature is available only to borrowers who are not currently on active payroll status. Balloon Payment: An installment payment on a promissory note - usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.

Borrower: An eligible person as specified in an executed Certification of Eligibility, prepared by the appropriate campus representative, who will be primarily responsible for the repayment of a Program loan. Bridge Loan: A temporary loan, usually less than 12 months, provided to a borrower when the net proceeds from a sale of a prior residence are not available for the purchase of a new home.

It is intended that a bridge loan will be paid off with the net proceeds from the prior residence's sale. Back to top. Close of Escrow: The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands.

Certification of Eligibility : Form signed by campus representative certifying that the applicant is eligible for Program participation and the amount of the loan allocation. Community Property: Property acquired by a married couple, or either spouse in a married couple, during marriage, when not acquired as the separate property of either.

Co-Borrower: Any individual who will assume responsibility on the loan, take a title interest in the property and intends to occupy the property as their primary residence. Co-Signer: Any individual who will assume responsibility on the loan, but who will not take a title interest in the property nor occupy the property.

Curtailment: An additional payment made to reduce the principal balance of a loan. Current MOP Rate: MOP rate currently in effect for Program loans. Also known as the Standard Rate. Date of Recordation: The date on which a deed of trust is officially entered on the books of the county recorder in the county in which the property is located.

Deed of Trust : A security instrument, used in place of a mortgage, conveying title in trust to a third party covering a particular piece of property. It is used to secure payment of a promissory note.

Deferred Payment Loan: A loan which allows the borrower to defer all the monthly principal and interest payments until the maturity date of the promissory note, at which time the outstanding principal loan balance and all accrued interest is due and payable.

Downpayment: The difference between the purchase price of real estate and the loan amount. The borrower is responsible for providing the funds for the downpayment. Employee: An Appointee who has actively begun to serve in his or her full-time position.

Equity: The difference between the fair market value of a property and the current indebtedness secured on the property. Escrow: A situation in which a third party, acting as the agent for the buyer and the seller, carries out the instructions of both and assumes the responsibilities of handling all the paperwork and disbursement of funds at settlement or at closing.

Typically, this is NOT an insurance policy, but a commitment from the insurance company to provide a policy for a specific property at a specific time and premium amount. Faculty Recruitment Allowance Program: A University of California program authorizing the granting of special housing allowances to assist with down payments, mortgage payments, and other housing related costs.

The assistance may be paid in one lump sum or over a period not to exceed ten years in equal, unequal, or declining balance amounts.

The maximum assistance amount is indexed based upon salary increases for faculty. The eligible population for the program is full-time University appointees who are members of the Academic Senate or who hold equivalent titles and Acting Assistant Professors.

Campuses have the option to require repayment of a portion of the housing allowance in the event that the recipient leaves University employment prior to a specified date. Formerly known as the Salary Differential Housing Allowance Program. Final Settlement or Closing Statement: A financial disclosure giving an accounting of all funds received and disbursed at loan closing.

Also known as HUD 1 Closing Statement. Graduated Payment Mortgage: The Graduated Payment Mortgage GP-MOP is an alternative loan product under the Mortgage Origination Program MOP that results in an initial lower interest rate Borrower Rate than the most recently published MOP rate Standard Rate.

The initial Borrower Rate is stated as a percentage below the Standard Rate, subject to a 3. The stated reduction in the Standard Rate is known as the Interest Rate Differential. The Interest Rate Differential is established to decrease annually between 0. Hazard Insurance: A contract where an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards.

Home Loan Coordinator: The person designated by the Chancellor of each campus and Laboratory Director as the Home Loan Coordinator. This individual serves as the primary contact at the campus level for loan applicants. Homeowners Association: An organization of homeowners residing within a particular development whose major purpose is to maintain and provide community facilities and services for the common enjoyment of the residents.

The typical policy does not include flood or earthquake coverage. The University does not impound for either property taxes or hazard insurance premiums. Inspection Reports: Reports ordered by the borrower to assess the quality of the home. Other reports that may be ordered include roof, foundation, geological, and, septic tank inspections.

Interest: Consideration in the form of money paid for the use of money, usually expressed as an annual percentage. Also, a right, share or title in property. Interest-Only Payment Loan: A non-amortizing loan in which the lender receives interest during the term of the loan and principal is repaid in a lump sum at maturity.

Interspousal Transfer Deed: A deed between two married individuals that relinquishes all, or a portion of, the interest, title, or claim in a property by the grantor.

Also known as Quit Claim Deed. IRS Mortgage Interest Statement: A statement provided by the lender to the borrower indicating the total amount of interest paid by the borrower for a given calendar year. Joint Tenancy: Joint ownership by two or more persons giving each tenant equal interest and equal rights in the property, including the right of survivorship.

Loan-to-Value LTV Ratio: The ratio of the principal balance of a mortgage loan to the value of the securing property, as determined by the purchase price or Appraised Value, whichever is less.

purchase contract, property appraisal, inspections, etc. and will state the approved loan amount, initial interest rate and loan term. The letter will also require that certain conditions are met prior to loan funding.

The initial interest rate specified will be the Program rate in effect at the time a loan commitment is issued. A loan commitment expires within 60 days of date issued. Loan Denial letter : A letter from the Office of Loan Programs denying a loan to a specific individual.

The reasons for denial may include credit history, lack of verifiable liquid assets, inadequate income, etc. Loan Underwriting: The analysis of risk and the decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors.

Loan Withdrawal letter : A letter from the Office of Loan Programs acknowledging that a borrower no longer wishes to pursue a loan from the University of California. A loan may be withdrawn due to dissatisfaction with the property or desire to use another lender, among other reasons.

MOP-Calculator: A web-based calculator for potential applicants to determine whether they might meet the minimum requirements for a MOP loan. Mortgage Origination Program MOP : MOP was established by The Regents of the University of California in and utilizes funds from the unrestricted portion of the University's Short-Term Investment Pool STIP to make variable interest rate first deed of trust loans of up to 30 years in length to eligible Faculty and members of the Senior Management Group.