[compduties]

Does anyone know what we are to use when figuring the debt-to-income ratio? Do we use the maximum amount in 5 years or the maximum amount ever during the term of the loan? (This will be changing from 7 years to 5 years in July, correct?). Thanks!

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[jholzknecht]

Regulation Z requires lenders to verify the borrower’s ability to repay loans made under Section 32 and under Section 35 (Higher-priced mortgage loans). There is a similar requirement for credit cards. And proposed regulations will expand the requirement to most loans secured by a dwelling. Under the Sections 32 and 35 the debt to income ration is calculated using the highest payment amount scheduled (the highest payment scheduled, not the higheest possible payment) in the first seven years of the loan.

I am not sure where you came up with the five year period instead of seven years. Effective on January 30, 2011 you should have begun providing the new rate and payment disclosure in the “Fed Box.” It shows paments at origination, at the highest rate in the first five years of the loan, and the payment based on the highest rate during the life of the loan.

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