24 CFR 206.21 - Interest rate.

§ 206.21 Interest rate.

(a)Fixed interest rate. A fixed interest rate is agreed upon by the mortgagor and mortgagee.

(b)Adjustable interest rate. An initial interest rate is agreed upon by the mortgagor and mortgagee. The interest rate shall be adjusted in one of two ways depending on the option selected by the mortgagor. Whenever an interest rate is adjusted, the new interest rate applies to the entire mortgage balance. The difference between the initial interest rate and the index figure applicable when the firm commitment is issued shall equal the margin used to determine interest rate adjustments.

(1) A mortgagee offering an adjustable interest rate shall offer a mortgage with an interest rate cap structure that limits the periodic interest rate increases and decreases as provided in § 203.49(a), (b), (d), and (f) of this chapter, except that reference to mortgagor's first debt service payment in § 203.49(d) shall mean closing, and references in § 203.49(f)(1) to one percentage point shall mean two percentage points.

(2) If a mortgage meeting the requirements of paragraph (b)(1) of this section is offered, the mortgagee may also offer a mortgage which provides for monthly adjustments to the interest rate, corresponding to an index as provided in § 203.49(a), (b), and (f)(1), or to the one-month CMT index or one-month LIBOR index, and which sets a maximum interest rate that can be charged without limiting monthly or annual increases or decreases. The first adjustment must occur on the first day of the second full month after closing.

(c)Pre-loan Disclosure.

(1) At the time the mortgagee provides the mortgagor with a loan application, a mortgagee also shall provide a mortgagor with a written explanation of any adjustable interest rate features of a mortgage. The explanation must include the following items:

(i) The circumstances under which the rate may increase;

(ii) Any limitations on the increase; and

(iii) The effect of an increase.

(2) Compliance with pre-loan disclosure provisions of 12 CFR part 226 (Truth in Lending) shall constitute full compliance with paragraph (c)(1) of this section.

(d)Post-loan disclosure. At least 25 days before any adjustment to the interest rate may occur, the mortgagee must advise the mortgagor of the following:

(1) The current index amount;

(2) The date of publication of the index; and

(3) The new interest rate.

(Approved by the Office of Management and Budget under control number 2528-0133)
[ 54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42760, Aug. 16, 1995; 72 FR 40050, July 20, 2007]

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United States Code

Title 24 published on 05-May-2017 03:17

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 24 CFR Part 206 after this date.

  • 2017-01-19; vol. 82 # 12 - Thursday, January 19, 2017
    1. 82 FR 7094 - Federal Housing Administration: Strengthening the Home Equity Conversion Mortgage Program
      GPO FDSys XML | Text
      DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, HUD, Office of the Assistant Secretary for Housing—Federal Housing Commissioner
      Final rule.
      Effective Date: September 19, 2017.
      24 CFR Parts 30 and 206
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