Consumer Handbook On Adjustable-Rate Mortgages (CHARM Booklet) is an informational booklet containing general information on Adjustable Rate Mortgages (ARM’s) that is provided by the lender to the loan applicant at the time of application for certain adjustable mortgage loans. The booklet is intended to make the borrower aware of the basics of an ARM product.
The current version of the CHARM Booklet is published by Consumer Financial Protection Bureau (CFPB) dated January 2014 and is available on its website here. The previous edition was published by the Federal Reserve Board and was dated April 2012.
The lender provides this booklet to the applicant primarily to comply with §1026.19(b)(1) of Regulation Z. Regulation Z implements Truth in Lending Act (TILA).
The booklet does not provide information that is specific to the loan you applied for or about the loan products offered by the lender. This is a general consumer awareness booklet and you should read it if you are unfamiliar with what an ARM is and how it works. It will help you in asking key questions from the lender for your ARM loan.
However, this booklet is not a substitute for understanding the specific loan you are applying for. You should spend time with the loan officer to ensure that you understand the key details of your particular loan.
It is your obligation to provide the Booklet to the applicant as per the timing and delivery requirements in Regulation Z.
Only one booklet needs to be provided per loan application. Therefore, you do not need to provide it to each applicant. However, send the disclosure to the primary applicant if readily identifiable from the application.
For in-person applications, the CHARM booklet should be provided at the time an application form is provided. For all other transactions, the CHARM Booklet must be delivered or placed in the mail not later than three business days following receipt of a loan application. Business day means a day on which your offices are open to the public for carrying on substantially all of its business functions. You cannot charge a non-refundable fee till the time the disclosures have been mailed. In case of online applications, the CHARM booklet may be provided to the loan applicant in electronic form on or with the application.
An important question is how to evidence the delivery of the Booklet. There are various ways in which you can accomplish that:
For brokered loans, do not rely on the mortgage broker to send the disclosure on your behalf. The regulation Z places the responsibility on the lender.
Regulation Z (12 CFR §1026.25 record retention) requires the lender to maintain evidence of compliance with Regulation Z for minimum two years after the date the disclosures is required to be made. Accordingly, you should maintain an appropriate form of evidence of sending the disclosure in your records for a minimum of 2 years.
Updated: Feb 15, 2014