CFPB’s consumer handbook on ARMs revised; eliminates references to LIBOR

A handbook that lenders must provide to adjustable rate mortgage (ARM) borrowers at application or before the consumer pays a non-refundable fee (whichever is earlier) has been updated by the Consumer Financial Protection Bureau (CFPB), the bureau said in a notice for the Federal Register.

The revisions to the Consumer Handbook on Adjustable Rate Mortgages (CHARM handbook) eliminated references to the London Interbank Offered Rate (LIBOR) due to LIBOR’s forecasted cessation, the notice says.

Overall, the updates to the handbook (also called the “CHARM” handbook) are to align with the bureau’s educational efforts, to be more concise, and to improve readability and usability, the notice states. New features include a comparison table that describes adjustable rate mortgages and their differences in relation to fixed-rate loan products; an explanation of how an adjustable rate mortgage works; a tutorial on how to review an ARM Loan Estimate and a lender’s ARM program disclosure; a comparison table for the various adjustable and fixed-rate loan offers that reader has received or will receive; and a description of the risks that come with different types of adjustable rate mortgages.

“The design of the CHARM booklet is intended to have a similar look and feel as Your Home Loan Toolkit (Toolkit), another consumer disclosure for which the Bureau is responsible and that will frequently be received by mortgage applicants at the same time as the CHARM booklet,” the notice states. “Similar to the Toolkit’s treatment of the Closing Disclosure, a significant portion of the booklet is devoted to encouraging the consumer to review the specific terms offered in their Loan Estimate, which they are also likely to receive at the same time as the CHARM booklet.”

It says portions of the Loan Estimate are reproduced and explained in the revised CHARM booklet.

The booklet is published and required to be given to ARM borrowers under the Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) and implementing rules.

Consumer Handbook on Adjustable Rate Mortgages

Federal Register notice (scheduled to publish June 9)

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