[Angie Cowell]

We have been providing a notice to our customer on variable rate loans (not ARM loans) whenever the rate/payment is reviewed and providing a notice even if there are no changes.

Our research has shown that this is not required by Reg. Z or state law. We would like to stop sending these notices as a cost savings measure. Since we have been sending these notices is there any requirement that we communicate to borrowers that this notice will no longer be sent?

Topic

[Angie Cowell]

To be clear, we are providing notices in the required time frames for ARM loans, our question above is specifically about non ARM variable rate loans.

[rcooper]

If you are discontinuing a non-required notice that your customers have come to expect it may be confusing to your customers if they don’t receive the notice from you. I don’t know of any requirement that says you must notify your customers that these will be discontinued. With that said, we have seen that many of the complaints regulators receive are due to a lack of communication between the bank and customer. It might be worth informing your customers when they will receive notices going forward.

Another thing to note is that you want to make sure these loans aren’t covered under 1026.20(c) and its commentary.

(1) Coverage. (i) In general. For purposes of this paragraph (c), an adjustable-rate mortgage or “ARM” is a closed-end consumer credit transaction secured by the consumer’s principal dwelling in which the annual percentage rate may increase after consummation.

and
Commentary 1026.20(c)(1)(i)-1: In general. An adjustable-rate mortgage, as defined in § 1026.20(c)(1)(i), is a variable-rate transaction as that term is used in subpart C, except as distinguished by comment § 1026.20(c)(1)(ii)-3. The requirements of this section are not limited to transactions financing the initial acquisition of the consumer’s principal dwelling.

Note: The reg and commentary provide a few exemption to this coverage rule.

[Author]

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