Supplement I to 12 CFR Part 1026 — Official Bureau Interpretations (Regulation Z Commentary, Non-TRID Sections)
Supplement I to 12 CFR Part 1026 is the CFPB's official staff commentary on Regulation Z. This register captures the operationally-load-bearing commentary interpreting the non-TRID sections only: §1026.20 (post-consummation events), §1026.23 (rescission), §1026.32 (high-cost mortgages), §1026.34 (HOEPA prohibited acts), §1026.35 (HPMLs), §1026.36 (LO compensation / servicing / arbitration), and §1026.43 (ATR/QM). TRID sections (§§1026.18, .19(e)/(f)/(g), .37, .38) are covered separately in reg-z-1026-supplement-i-trid. Each obligation cites the verbatim comment text and identifies the parent rule it interprets via the `interprets` field.
Verbatim regulatory text
Verbatim provisions from Supplement I to 12 CFR Part 1026 — Official Bureau Interpretations (Regulation Z Commentary, Non-TRID Sections) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Supplement I — Comment 20(a)-1: §1026.20(a) refinancing definition
1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law.
Supplement I — Comment 20(c)-2: §1026.20(c) ARM rate-adjustment notice — loss-mitigation-mod exclusion
2. Loan modifications. Under § 1026.20(c) , the interest rate adjustment disclosures are required only for interest rate adjustments occurring pursuant to the loan contract. Accordingly, creditors, assignees, and servicers need not provide the disclosures for interest rate adjustments occurring in loan modifications made for loss mitigation purposes. Subsequent interest rate adjustments resulting in a corresponding payment change occurring pursuant to the modified loan contract, however, are subject to the requirements of § 1026.20(c) .
Supplement I — Comment 23(a)(3)-1: §1026.23(a)(3) rescission period runs from last of 3 events
1. Rescission period. i. The period within which the consumer may exercise the right to rescind runs for 3 business days from the last of 3 events:
Supplement I — Comment 23(b)(1)-1: §1026.23(b)(1) two copies of rescission notice per consumer
1. Who receives notice. Each consumer entitled to rescind must be given two copies of the rescission notice and the material disclosures.
Supplement I — Comment 23(c)-1: §1026.23(c) no creditor performance during rescission window
1. General rule. Until the rescission period has expired and the creditor is reasonably satisfied that the consumer has not rescinded, the creditor must not, either directly or through a third party:
Supplement I — Comment 23(d)(2)-1: §1026.23(d)(2) refunds include any amount paid by consumer
1. Refunds to consumer. The consumer cannot be required to pay any amount in the form of money or property either to the creditor or to a third party as part of the credit transaction. Any amounts of this nature already paid by the consumer must be refunded.
Supplement I — Comment 32(a)(1)(i)-1: §1026.32(a)(1)(i) APOR coverage test
1. Average prime offer rate. High-cost mortgages include closed- and open-end consumer credit transactions secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by the specified amount.
Supplement I — Comment 34(a)(3)-1: §1026.34(a)(3) borrower-interest test for HOEPA refi within one year
1. In the borrower's interest. The determination of whether or not a refinancing covered by § 1026.34(a)(3) is in the borrower's interest is based on the totality of the circumstances, at the time the credit is extended. A written statement by the borrower that “this loan is in my interest” alone does not meet this standard.
Supplement I — Comment 34(a)(5)(i)-3: §1026.34(a)(5)(i) HOEPA pre-loan counseling must precede extension
3. Processing applications. Prior to receiving certification of counseling, a creditor may not extend a high-cost mortgage, but may engage in other activities, such as processing an application that will result in the extension of a high-cost mortgage (by, for example, ordering an appraisal or title search).
Supplement I — Comment 35(b)(1)-1: §1026.35(b)(1) escrow account must be established before consummation
1. Administration of escrow accounts. Section 1026.35(b)(1) requires creditors to establish an escrow account for payment of property taxes and premiums for mortgage-related insurance required by the creditor before the consummation of a higher-priced mortgage loan secured by a first lien on a principal dwelling.
Supplement I — Comment 35(a)(1)-1: §1026.35(a)(1) comparable transaction for APOR comparison
1. Comparable transaction. A higher-priced mortgage loan is a consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by the specified margin.
Supplement I — Comment 36(d)(1)-1.i: §1026.36(d)(1) "based on" a term means objective facts and circumstances
1. Compensation that is “based on” a term of a transaction. i. Objective facts and circumstances. Whether compensation is “based on” a term of a transaction does not require a comparison of multiple transactions or proof that any person subjectively intended that there be a relationship between the amount of the compensation paid and a transaction term.
Supplement I — Comment 36(d)(1)-2.ii: §1026.36(d)(1) proxy-for-a-term test
ii. Proxies for terms of a transaction. If the loan originator's compensation is based in whole or in part on a factor that is a proxy for a term of a transaction, then the loan originator's compensation is based on a term of a transaction. A factor (that is not itself a term of a transaction) is a proxy for a term of a transaction if the factor consistently varies with a term or terms of the transaction over a significant number of transactions, and the loan originator has the ability, directly or indirectly, to add, drop, or change the factor when originating the transaction.
Supplement I — Comment 36(e)(1)-2: §1026.36(e)(1) prohibited steering — comp-driven choice not in consumer interest
2. Prohibited conduct. Under § 1026.36(e)(1) , a loan originator may not direct or steer a consumer to consummate a transaction based on the fact that the loan originator would increase the amount of compensation that the loan originator would receive for that transaction compared to other transactions, unless the consummated transaction is in the consumer's interest.
Supplement I — Comment 36(e)(3)-1: §1026.36(e)(3) "significant number of creditors" = 3 or more
1. Significant number of creditors. A significant number of the creditors with which a loan originator regularly does business is three or more of those creditors.
Supplement I — Comment 36(g)-1: §1026.36(g) NMLSR ID required on loan documents
1. NMLSR ID. Section 1026.36(g) requires a loan originator organization to include its name and NMLSR ID and the name and NMLSR ID of the individual loan originator on certain loan documents.
Supplement I — Comment 36(i)-1: §1026.36(i) financing credit insurance premiums = adding to amount owed
1. Financing credit insurance premiums or fees. In the case of single-premium credit insurance, a creditor violates § 1026.36(i) by adding the credit insurance premium or fee to the amount owed by the consumer at closing. In the case of monthly-pay credit insurance, a creditor violates § 1026.36(i) if, upon the close of the monthly period in which the premium or fee is due, the creditor includes the premium or fee in the amount owed by the consumer.
Supplement I — Comment 43(c)(1)-1: §1026.43(c)(1) reasonable and good-faith ATR — no comprehensive UW standards
1. Reasonable and good faith determination. i. General. Creditors generally are required by § 1026.43(c)(1) to make reasonable and good faith determinations of consumers' ability to repay. Section 1026.43(c) and the accompanying commentary describe certain requirements for making this ability-to-repay determination, but do not provide comprehensive underwriting standards to which creditors must adhere.
Supplement I — Comment 43(b)(1)-1: §1026.43(b)(1) "covered transaction" restates §1026.43(a) scope
1. The definition of covered transaction restates the scope of the rule as described at § 1026.43(a) .
Supplement I — Comment 23(c)-1: §1026.23(c) no creditor performance during rescission window — enumerated items (chapeau recall fix)
i. Disburse loan proceeds to the consumer. ii. Begin performing services for the consumer. iii. Deliver materials to the consumer.