The DOD has issued regulations under the Military Lending Act to be effective for consumer loans to active military personnel and their dependents closed on or after October 3, 2016. The Regulations require a certain disclosure be provided both orally and in writing at loan closing. The required disclosure is set out below.
Residential mortgages (and certain other type loans) are specifically excluded from the rule. A residential mortgage “…is any credit transaction secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage.”
Land loans (where the borrower does not intend to build a dwelling on the land) are NOT excluded from coverage, so beginning October 3, 2016, lenders who make land loans must provide the following disclosure to the borrowers on or before loan closing:
“Federal law provides important protections to members of the Armed Forces and their dependents relating to extensions of consumer credit. In general, the cost of consumer credit to a member of the Armed Forces and his or her dependent may not exceed an annual percentage rate of 36%. This rate must include, as applicable to the credit transaction or account: the costs associated with credit insurance premiums; fees for ancillary products sold in connection with the credit transaction; any application fee charged (other than certain application fees for specified credit transactions or accounts); and any participation fee charged (other than certain participation fees for a credit card account).”
The NCUA has published an online compliance guide at the following address:
www.ncua.gov/Legal/Documents/Regulatory%20Alerts/RA2016-04-Enclosure-Complying-with-Changes-Military-Lending.pdf
If you have any questions or concerns about this upcoming change, please contact us.
BairdLaw, PLLC
242 West Sunset Ste 201
San Antonio, Texas 78209
210 828 5844
www.bairdlaw.com