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CHARM Booklet

What is a CHARM Booklet?

CHARM Booklet

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).


Contents of the Booklet

  1. What is an ARM: A brief overview of an ARM loan.
  2. How ARMs work: Description on initial rate and payments, adjustment period, index, margin, interest-rate caps, and payment caps.
  3. Types of ARMs: Description on Hybrid ARMs, Interest Only ARMs, and Payment-option ARMs.
  4. Consumer Cautions: Description on discounted interest rates, payment shock, negative amortization, prepayment penalties and conversion, and graduated payment or stepped rate loans.
  5. Where to get information: Description on sources of information.
  6. Glossary: Description of terms used in the booklet.

Borrower's Considerations

Informational Use Only

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.


Lender's Considerations

It is your obligation to provide the Booklet to the applicant as per the timing and delivery requirements in Regulation Z.

When is a CHARM Booklet Sent?

  1. Application is for an adjustable rate mortgage.
  2. Application is for a consumer purpose loan, i.e. loan extended primarily for a personal, family, or household purpose.
  3. Application is for a closed end loan. Therefore, it will not apply for HELOCs.
  4. Application is for a loan is secured by owner occupied home, which includes primary residence and second homes.
  5. Application is for a loan having a loan term greater than one year.

Whom to Send?

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.

Timing for Delivery – 3 Business Day Rule

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.


Evidencing the Delivery of CHARM Booklet

An important question is how to evidence the delivery of the Booklet. There are various ways in which you can accomplish that:

  1. Applicant's Acknowledgement of Receipt: You may as ask the loan applicant to send you an acknowledgement that he/she has received the booklet within three business days from receipt of loan application. You may combined this acknowledgement with the acknowledgment for all other initial disclosures, such as TIL, ARM disclosure, etc.
  2. System Log: If you are sending the booklet online then your system may log a memo or record of mailing. This would be an appropriate form of documentation.
  3. Checklist: You may prepare an internal checklist, for each file, where the loan processor or loan officer checks the list of documents sent at the time of application. This is a weaker form of evidence of delivery as compared to borrower’s acknowledgement.
  4. Copy of Booklet in Loan File: Some lenders keep a copy of the Booklet, along with a date stamp, in the loan application as evidence of delivery of disclosure. This is not an ideal method and creates difficulties when imaging loan documents.

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.

Record Retention

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.


Document Summary

CHARM Booklet
CHARM booklet provides a loan applicant with key information on ARMs.
Use in Mortgages
The lender sends the booklet to comply with §1026.19(b)(1) of Regulation Z
Other Names
  • CHARM Booklet
  • Consumer Handbook On Adjustable-Rate Mortgages Booklet
Provided By
Provided To
Loan applicants
Notarization Required
Signed By
Life Cycle Stage
Evidence of delivery should be maintained for at least two years after the date the disclosure is required to be made.
Model Form
The booklet is made available by Consumer Financial Protection Bureau. You may use the CFPB version or order from another source as long as there are no changes to the booklet.
Applicable Laws
CFPB Regulation Z, 12 CFR §1026.19(b)(1)

Updated: Feb 15, 2014


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