[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR617.7125]



[Page 205-206]

 

                       TITLE 12--BANKS AND BANKING

 

                 CHAPTER VI--FARM CREDIT ADMINISTRATION

 

PART 617_BORROWER RIGHTS--Table of Contents

 

            Subpart B_Disclosure of Effective Interest Rates

 

Sec. 617.7125  How should a qualified lender determine the effective 

interest rate?



    (a) A qualified lender must calculate the effective interest rate on 

a loan using the discounted cash flow method showing the effect of the 

time value of money.

    (b) For all loans, the cash flow stream used for calculating the 

effective interest rate of a loan must include:

    (1) Principal and interest;

    (2) The cost of stock or participation certificates that a borrower 

is required to purchase in connection with the loan; and

    (3) Loan origination charges described in Sec. 617.7115.

    (c) A qualified lender must establish policies and procedures for 

EIR disclosures that clearly show the effect of the cost of borrower 

stock (or participation certificates) and loan origination charges on 

the interest rate of a



[[Page 206]]



loan. A qualified lender must also establish policies and procedures for 

determining major assumptions used in calculating the effective interest 

rate, e.g., criteria on how the cost of borrower stock (or participation 

certificates) and loan origination charges are assigned or allocated 

among multiple loans obtained by a borrower simultaneously.