[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.