Regulation Z ARM Changes – Still?

Regulation Z had a proposed rule with a comment period that expired 12/31/09. This proposal received over 3300 comments primarily focused on the section that would prohibit loan originator compensation based on the terms of the loan. Now that the financial regulatory reform bill has included the ‘prohibition on steering’ and restriction of loan originator compensation, we’ll be watching this proposed rule related to the ARM disclosure changes. The proposed rule included changes to ARM disclosure content requirements and it adds three new one page documents that must be provided to borrowers. Of significance is the proposed to change in the definition of finance charge to include almost all closing costs. We have seen comments from the regulators indicating they recognize that the change in the finance charge calculation will cause more loans to fall into a high cost loan. We’ll be watching this provision of the rule very closely as the Fed picks this proposal up in the future.