The Home Ownership and Equity Protection Act of 1994 (the HOEPA) amended TILA by adding disclosure requirements for high-rate, high-fee loans.
The loans covered under HOEPA are high-cost loans. They may also be called Section 32 loans because that is the section of Regulation Z in which they are defined. A high-cost loan is defined as any consumer credit transaction that is secured by the borrower’s principal dwelling in which:
- the APR exceeds the APOR by more than:
- 6.5 percentage points for a first-lien loan;
- 8.5 percentage points for a first-lien transaction if the dwelling is personal property (e.g., a manufactured home) and the loan amount is less than $50,000; or
- 8.5 percentage points for a subordinate lien loan; or
- the total points and fees payable exceed:
- for a transaction with a loan amount of $20,579 or more, five percent of the total loan amount; or
- for a transaction with a loan amount of less than $20,579, the lesser of eight percent of the total loan amount or $1,029; or
High-Cost Loan – (continued)
A high-cost loan is defined as any consumer credit transaction that is secured by the borrower’s principal dwelling in which (continued):
- the creditor may charge:
- a prepayment penalty more than 36 months after consummation or account opening; or
- total prepayment penalties exceeding more than two percent of the amount prepaid.
The points and fees trigger ($1,029) and the total loan amount threshold ($20,579) figures must be adjusted annually on January 1 based on the annual percentage change in the Consumer Price Index reported on the preceding June 1.
For a $30,000 second-mortgage loan to be a high-cost mortgage, the APR must exceed the APOR by more than 8.5 percentage points or have points and fees charged that exceed 5% of the loan amount.
A $16,500 first mortgage is a high-cost mortgage if the APR exceeds the APOR by more than 6.5 percentage points or has points and fees that exceed the lesser of 8% of the loan amount or $1,029. In this case, the lender charges 6% in fees ($990), which is less than both the 8% and the $1,029thresholds. However, it is still considered to be a high-cost mortgage because it meets the 6.5 percentage points threshold required under the HOEPA.
High-Cost Loan – (continued)
Exemptions (12 CFR 1026.32(a)(2))
The rules related to high-cost mortgages do not apply to:
- a reverse mortgage transaction;
- a transaction to finance the initial construction of a dwelling;
- a transaction originated by a housing finance agency that is also the creditor for the transaction; or
- a transaction originated under the U.S. Department of Agriculture’s Rural Development Direct Loan Program.
In addition to other disclosures required under TILA, a creditor making a high-cost loan must provide a borrower certain disclosures at least three business days prior to consummation. They include:
- the following statement:
|You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan.|
- the annual percentage rate.
- the amount of the regular monthly or other periodic payment and the amount of any balloon payment.
- for a variable-rate transaction, a statement that the interest rate and monthly payment may increase and a disclosure of the amount of the single maximum monthly payment based on the loan’s maximum interest rate.
- for a closed-end transaction:
- the total amount the consumer will borrow, as reflected by the face amount of the note; and
- when the amount borrowed includes finance charges allowed in the calculation of points and fees in a high-cost mortgage, that fact must be stated, together with the disclosure of the amount borrowed.
The disclosure of the amount borrowed is considered accurate if it is not more than $100 above or below the amount required to be disclosed.
A high-cost loan may not provide for:
- a payment schedule with regular periodic payments that result in a balloon payment, unless:
- the payment schedule is adjusted for the irregular or seasonal income of the borrower;
- the loan is a bridge loan with a term of 12 months or less, taken in connection with the acquisition or construction of a dwelling that will be the borrower’s principal residence; or
- the loan satisfies the requirements of a balloon-payment qualified mortgage.
- negative amortization.
- a payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds.
- an increase in the interest rate after default.
- a refund calculated by a method less favorable than the actuarial method for rebates of interest arising from a loan acceleration due to default.
The actuarial method is a method of calculating prepaid interest refunds that approximates the interest actually earned on a day-by-day basis; for a one-year loan, the interest is 1/365 per day.
A high-cost loan may not provide for (continued):
- a prepayment penalty for longer than 36 months after consummation.
- a demand feature that allows the lender to terminate the loan in advance of the original maturity date and demand repayment of the entire outstanding balance. However, repayment may be accelerated if the consumer:
- committed fraud or material misrepresentation in connection with the loan;
- fails to meet the repayment terms for any outstanding balance; or
- acts in a manner that adversely affects the lender’s security for the loan or any right of the lender in the security.
A lender extending mortgage credit subject to HOEPA may not:
- pay a contractor under a home improvement contract from the loan proceeds other than:
- by an instrument payable to the consumer;
- jointly to the consumer and the contractor; or
- at the election of the consumer, through a third-party escrow agent in accordance with terms established in a written agreement signed by the consumer, the lender and the contractor prior to the disbursement. (12 CFR 1026.34(a)(1))
- sell or assign the mortgage to another person without furnishing the following statement to the purchaser or assignee:
|Notice: This is a mortgage subject to special rules under the federal Truth in Lending Act. Purchasers or assignees of this mortgage could be liable for all claims and defenses with respect to the mortgage that the borrower could assert against the lender. (12 CFR 1026.34(a)(2))|
A lender extending mortgage credit subject to HOEPA may not (continued):
- within one year of making a high-cost loan, refinance the same borrower into another such loan unless the refinancing is in the borrower’s interest. (12 CFR 1026.34(a)(3))
An assignee holding or servicing the loan is subject to the same prohibition for the remainder of the one-year period. A lender or assignee may not try to evade this provision by arranging for refinancing of its own loans by affiliated or unaffiliated lenders or by modifying a loan agreement and charging a fee.
- recommend or encourage default on an existing loan or other debt prior to and in connection with the consummation of a high-cost mortgage that refinances all or any portion of the existing loan or debt. (12 CFR 1026.34(a)(3))
- finance fees and charges that are required to be included in the calculation of points and fees. (12 CFR 1026.34(a)(10))
- structure a transaction that is a high-cost mortgage in a form with the intent of evading the requirements of a high-cost mortgage, including dividing the loan transaction into separate parts. (12 CFR 1026.34(b))
- in an open-end, high-cost mortgage, extend credit based on the value of the consumer’s collateral without regard to his repayment ability as of the date of consummation, including consideration of his current and reasonably expected income, employment, assets other than the collateral, current obligations and mortgage-related obligations (i.e., expected property taxes, premiums for mortgage-related insurance required by the lender and similar expenses). This prohibition does not apply to temporary (bridge) loans that have terms of 12 months or less. (12 CFR 1026.34(a)(4))
Verification of Repayment Ability for an Open-End High-Cost Mortgage (12 CFR 1026.34(a)(4))
A lender must verify the consumer’s repayment ability in an open-end, high-cost mortgage by:
- verifying the amounts of income or assets it relies upon to determine repayment ability. Expected income or assets may be verified by the consumer’s W-2 forms, tax returns, payroll receipts, financial institution records or other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets.
- verifying the consumer’s current obligations, including any mortgage-related obligations associated with another credit obligation undertaken prior to or at account opening and secured by the same dwelling.
Verification of Repayment Ability for an Open-End High-Cost Mortgage – (continued)
A lender is presumed to be in compliance with the requirement to verify repayment ability if it:
- verifies the consumer’s repayment ability;
- determines the consumer’s repayment ability, taking into account current obligations and mortgage-related obligations, using the largest required minimum periodic payment based upon the following assumptions:
- The consumer borrows the full credit line approved at account opening with no additional extensions of credit;
- The consumer makes only required minimum periodic payments during the draw period and any repayment period; and
- If the APR may increase on the open-end credit, the maximum APR included in the contract applies at account opening and during the draw period and any repayment period; and
- assesses the consumer’s repayment ability taking into account at least one of the following:
- the ratio of total debt obligations to income (i.e., debt-to-income ratio); and/or
- the income the consumer will have after paying debt obligations.
There is no presumption of compliance available for a transaction for which the regular periodic payments would cause the principal balance to increase.
Certificate of Counseling (12 CFR 1026.34(a)(5))
A creditor may not extend a high-cost mortgage to a consumer unless the creditor receives written certification that the borrower has obtained counseling from a HUD- or state housing finance authority-approved counselor as to the advisability of the mortgage. The counseling must occur after the consumer receives:
- the Loan Estimate;
- disclosures required under a home equity loan; or
- disclosures required for a high-cost mortgage.
A consumer may not be steered or directed to choose a particular counselor or counseling organization.
Late Fees (12 CFR 1026.34(a)(8))
To be lawfully charged, a late payment fee must be specifically permitted by the terms of the loan contract or open-end credit agreement. However, if permitted, it may not:
- exceed four percent of the payment past due;
- be imposed more than once for any single late payment;
- be imposed before the end of the 15-day grace period (i.e., the 16th day following the date the payment is due);
- be imposed because a late payment fee previously assessed was deducted from a timely made full payment.
Payoff Statement (12 CFR 1026.34(a)(9))
A lender or servicer must provide, upon the request of a consumer or his agent, a statement of the amount due to pay off a high-cost mortgage. The statement must be provided for free up to four times during any one calendar year, but the lender may charge a reasonable fee for any additional requests. All payoff statements must be provided within five business days after receipt of the request.
Minimum Standards for Transactions
In addressing the Ability to Repay and Qualified Mortgage rules, Regulation Z (as amended by the revisions to TILA) establishes minimum standards for any consumer credit transaction that is secured by a dwelling, including any real property attached to a dwelling (i.e., covered transaction). These provisions do not, however, cover home equity lines of credit, bridge loans or reverse mortgages.
The revisions to TILA resulting from the passage of the Dodd-Frank Act in 2010 were Congress’ response to the housing crisis of the 2000s and were put in place to protect the mortgage marketplace and homeowners from the effects of past lax underwriting standards (e.g., the making of low-doc and no-doc loans, equity-based lending). By requiring that loan issue be based on the proper analysis of a borrower’s ability to repay the loan, the likelihood of fraud in loan origination is reduced and consumers may be protected from predatory lending activities. The new rules also address the improper use of multiple loans (i.e. piggyback lending) by requiring that, if a creditor knows that more than one loan is being secured by the same property and the same borrower, the creditor make a good faith determination that the borrower is able to repay the combined payments of all loans secured by the same property.
Ability to Repay Rule
Under the Ability to Repay (ATR) Rule, a creditor may not make a covered loan unless it makes a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms.
Covered Transaction (12 CFR 1026.43(b)(1))
The ATR Rule is broad in its context. As such, a covered transaction is a consumer credit transaction secured by a dwelling, including any real property attached to the dwelling.
A dwelling is a residential structure of up to four units that is used as a residence and includes a condominium; a cooperative unit; a mobile home, boat or trailer, if used as a residence; and a second home.
Fully Indexed Rate (78 Fed.Reg., No. 20, Official Interpretations 43(b)(3), 6602)
The fully indexed rate is the interest rate that is calculated using the subject loan’s index or formula that will apply after recast and the maximum margin that may apply at any time during the term of the loan. A loan product’s low introductory rate may not be included in the calculation of the fully indexed rate.
Definitions – (continued)
Recast (12 CFR 1026.43(b)(11))
Recast is the time within a loan’s term at which payments that will fully amortize the loan over its remaining term are required. In other words, recast occurs at the end of the period during which:
- payments on an adjustable-rate mortgage are based on a low introductory rate.
- interest-only payments may be made on an interest-only loan.
- negatively amortizing payments may be made on a negative amortization loan.
Fully Amortizing Payment (12 CFR 1026.43(b)(2))
Fully amortizing payments are periodic payments of principal and interest that, when paid according to the repayment schedule, will fully repay the loan over its term.
Definitions – (continued)
Simultaneous Loan (12 CFR 1026.43(b)(12))
A simultaneous loan is an additional covered transaction or an open-end home equity line of credit that will be secured by the same dwelling and is:
- made to the same consumer at the same time or before the closing on the covered transaction; or
- if made after the closing, made to cover the closing costs of the first transaction.
Mortgage-Related Obligations (12 CFR 1026.43(b)(8))
Mortgage-related obligations include:
- property taxes;
- taxes, assessments and surcharges imposed by a government entity;
- fees and special assessments imposed by a condominium, cooperative or homeowners’ association;
- ground rent and leasehold payments; and
- premiums for insurance products required by the creditor, such as homeowners insurance, credit insurance and charges for debt cancellation or suspension coverage.
In assessing a consumer’s ability to repay, a creditor must consider the consumer’s:
- current or reasonably expected income or assets other than the value of the property securing the loan.
- current employment status, if income from his employment is used in determining repayment ability.
- monthly payment on:
- the covered transaction; and
- any simultaneous loan that the creditor knows, or has reason to know, will be made.
- monthly payment for mortgage-related obligations.
- current debt obligations, including alimony and child support.
- monthly debt-to-income ratio or residual income.
- credit history.
Repayment Assessment – (continued)
The information relied upon in determining a consumer’s repayment ability must be verified using reasonably reliable third-party records. As such, income and/or assets may be verified with:
- copies of federal and/or state tax returns.
- W-2 forms or similar IRS forms used for reporting wages and/or tax withholding.
- payroll statements, including Leave and Earnings Statements from the military.
- financial institution records.
- records from the consumer’s employer or a third party that obtained information from the employer.
- if applicable, records from a federal, state or local government agency stating the consumer’s income from benefits or entitlements.
- receipts from the consumer’s use of:
- check cashing services; and/or
- a funds transfer service.
Repayment Assessment – (continued)
In addition, a creditor may rely on a credit report to verify a consumer’s current debt obligation. However, if the consumer’s application includes a current debt that is not shown on the consumer’s credit report, the debt need not be independently verified.
One of the most important considerations in determining repayment ability is the consumer’s ability to make prescribed monthly payments. In general, the periodic payment amount upon which that determination is made is calculated using the greater of the fully indexed rate of the loan or any introductory rate and substantially equal monthly payments that fully amortize the loan.
Special rules apply to simultaneous loans, loans with a balloon payment or interest-only payments, and those that provide for negative amortization. While there may be circumstances under which a consumer would want such a nontraditional loan, under the ATR Rule, the applicant must still qualify for such a loan based on his ability to make amortizing payments at the fully indexed rate.
Payment Shock Refinancings
The amended TILA includes provisions that encourage creditors to refinance potentially unaffordable mortgages, known as hybrid loans (e.g., ARMs, interest-only loans and negative amortization loans), to standard, more affordable mortgages. The goal of these provisions is to create an opportunity for a consumer to avoid the payment shock that will occur when his initial fixed interest rate expires and becomes an adjustable rate. As such, these refinancing are called payment shock refinancings.
Payment Shock Refinancings – (continued)
Under the ATR Rule, a creditor is exempt from performing a full repayment analysis when originating a payment shock refinancing provided each of the following conditions is met:
- The refinancing must be provided by the borrower’s current creditor or loan servicer.
- The monthly payment on a new standard mortgage must be materially lower (i.e., a reduction of 10%) than the monthly payment on the nonstandard mortgage.
- The creditor must receive the borrower’s application for a refinancing no later than two months after the nonstandard mortgage has recast.
- On the existing non-standard mortgage, the borrower may not have made:
- more than one payment that is more than 30 days late during the 12 months immediately preceding the creditor’s receipt of the refinance application; and
- any payments more than 30 days late during the six months immediately preceding the creditor’s receipt of the refinance application.
- For a loan consummated after January 10, 2014, the existing loan:
- must have been subject to an ability-to-repay analysis; or
- must be a qualified mortgage
Provisions in the Dodd-Frank Act established a presumption of compliance with the ATR requirements for a certain category of mortgages called qualified mortgages, thus giving creditors the incentive to make such mortgages by protecting creditors from liability.
(12 CFR 1026.43(e)(2))
A qualified mortgage (QM) is a covered transaction:
- that provides for substantially equal, regular periodic payments that do not:
- result in an increase in the principal balance (i.e., negative amortization);
- allow the borrower to defer the repayment of principal (i.e., interest-only loans); or
- in general, result in a balloon payment at maturity.
- for which the lender determines repayment ability based on:
- the monthly payment for mortgage-related obligations;
- the consumer’s reasonably expected income and assets; and
- the consumer’s debt obligations.
Qualified Mortgage Rule
A QM may not:
- have a term that exceeds 30 years;
- provide for points and fees that exceed three percent of the total loan amount; and
- have a monthly debt-to-income ratio that exceeds 43 percent.
In making a QM, required underwriting standards include:
- calculation of monthly payments using the maximum interest rate that may apply during the loan’s first five years.
- periodic payments that will repay:
- the principal balance that is outstanding after the interest rate adjusts to the maximum rate applicable during the loan’s first five years; or
- the loan amount over the term of the loan.
- verification of the consumer’s current or reasonably expected income or assets.
- calculation of the consumer’s:
- current debt obligations, including alimony and child support; and
- monthly debt-to-income ratio, which may not exceed 43 percent.
Limitations on Points and Fees (12 CFR 1026.43(e)(3), 78 FR 6531)
A QM of $102,894 or more may not have points and fees that exceed three percent of the total loan amount. For mortgages with smaller loan amounts, the points and fees limitation is based on loan size and is adjusted for inflation on January 1 of each year.
Calculating Monthly Payments(12 CFR 1026.43(b)(3), -(e)(2)(iv)(A), 78 FR 6479)
To be classified as a QM, monthly payments for determining ability to repay are calculated at the maximum rate of interest that will apply during the first five years of the loan term, resulting in periodic payments that will repay:
- the principal balance that is outstanding after the interest rate adjusts to the maximum rate applicable during the loan’s first five years; or
- the loan amount over the term of the loan.
This method of calculating monthly payments differs from the method used in calculating monthly payments for nonqualified mortgages, which uses the fully indexed rate as determined at the time of consummation of the loan and fully amortizing monthly payments that are substantially equal.
ATR vs. QM Rules
The two sets of underwriting standards in the rule are derived from guidelines in the Dodd-Frank Act. QM underwriting rules take into account any adjustment in interest rate that can occur during the first five years, including any adjustment due to changes in the index rate, but ignore any adjustment in interest rate that may occur after the first five years (e.g., for an ARM with an initial adjustment period of seven years, the interest rate used for the QM calculation will be the initial interest rate). In contrast, there is no time limitation on adjustments in the nonqualified mortgage.
Another distinction between the underwriting requirements for a nonqualified mortgage and a QM deals with the debt-to-income ratio. There is no limiting ratio for a nonqualified mortgage. However, in order to earn the safe harbor that is extended to QMs, the consumer’s total monthly debt may not exceed 43 percent of his total monthly income.
As such, the ATR Rule, while tightening lending standards, does not require that a creditor base its lending decisions on strict mathematical models. Rather, it gives a creditor the ability to exercise its discretion by refraining from setting out certain specifications, such as:
- how much income would be needed to support a particular level of debt; or
- how credit history should be weighed against other factors.
Ultimately, a lending decision is in compliance with the new statutory and regulatory standards when a creditor makes a reasonable and good faith determination that the loan applicant has a reasonable ability to repay the loan according to its terms based on its consideration of the eight assessment factors required under the ATR rule.
Under the ATR/QM rule, a covered transaction may not include a prepayment penalty unless:
- the prepayment penalty is permitted by law; and
- the transaction:
- has an annual percentage rate that may not increase after consummation;
- is a qualified mortgage; and
- is not a higher-priced mortgage.
- the fee does not exceed:
- two percent of the outstanding loan balance prepaid if prepaid during the first two years following consummation; or
- one percent of the outstanding loan balance prepaid if prepaid during the third year following consummation.
When a creditor offers a consumer a covered transaction that includes a prepayment penalty, it must also offer him a loan product that:
- does not have a prepayment penalty;
- has an annual percentage rate that may not increase after consummation; and
- has the same type of interest rate as the loan that has the prepayment penalty (e.g., a fixed rate or variable rate).
If the subject transaction meets all of these criteria, a creditor is still prohibited from including a prepayment penalty in the loan unless it also offers an alternative mortgage product that does not include a prepayment penalty and that:
- has the same type of interest rate as the mortgage that includes a prepayment penalty provision (e.g., both loans are fixed-rate mortgages or both loans are step-rate mortgages).
- has the same loan term as the term for the mortgage that includes a prepayment penalty provision.
- meets the requirements of a QM in terms of:
- periodic payments; and
- points and fees limitations.
- is offered with a good faith belief that the consumer will be able to qualify for the loan.
If the credit securing a consumer’s dwelling does not meet the definition of open-end credit, a creditor may not structure the loan as an open-end loan in order to evade the requirements for closed-end transactions.
As evidence of compliance, records relating to minimum standards for transactions must be retained for three years after consummation of a transaction.
Homeowners Protection Act (HPA)
The Homeowners Protection Act (HPA), signed in 1998 and amended in 2000, was enacted to assist homeowners in the cancellation and termination of private mortgage insurance (PMI) once the requirement to maintain such coverage has passed. The law applies to most conventional, first-lien residential mortgage loans obtained on or after July 29, 1999; it does not apply to VA- or FHA-backed loans or second mortgages.
Private Mortgage Insurance
To compensate for the increased risk of borrower default when a loan-to-value ratio exceeds 80 percent:
- a lender may:
- charge a higher interest rate or more discount points for the loan; or
- require that the borrower pay a premium for mortgage insurance.
- if the loan is to be sold to Fannie Mae and Freddie Mac, it must be insured by PMI, issued by a private mortgage insurance company. In addition to protecting the lender, this insurance also benefits a borrower by enabling him to get financing with a smaller down payment.
The insurance premium may be:
- included in the borrower’s payment; or
- paid by the lender and repaid by the borrower in the form of a higher interest rate on the loan.
As the down payment decreases, the loan as a percentage of value increases, increasing the risk of default and the amount of the mortgage insurance required.
Cancellation of PMI
As the borrower pays down his loan, the lender’s risk decreases, as does the need for the PMI.
The borrower may submit a written request to the lender seeking cancellation of the PMI if:
- the mortgage has been paid to the point where it equals 80 percent of the lower of:
- the home’s purchase price; or
- the appraised value of the home at the time of purchase;
- the borrower has not made a payment more than:
- 30 days late in the past year; or
- 60 days late in the past two years;
- there are no subordinate liens against the property; and
- the property is not worth less than the original purchase price or value.
If the lender does not grant the request, it must provide reasons for the denial.
PMI coverage is automatically canceled:
- if his loan payments are current, once the borrower pays his mortgage down to 78 percent of the original value; or
- when a loan that is current reaches the midpoint of its amortization period (e.g., after 180 payments of a 30-year loan).
A lender or servicer must notify a consumer of his rights regarding PMI insurance:
- at loan closing;
- annually; and
- upon cancellation or termination of the PMI.
At loan closing, a lender must disclose:
- when the borrower may request cancellation of the PMI.
- when the PMI will be automatically terminated.
- any exemptions to the right to cancellation or automatic termination.
- for fixed-rate loans only, a written initial amortization schedule.
The cost for PMI insurance is disclosed initially on the Loan Estimate and then again on the Closing Disclosure.
Annually, a mortgage loan servicer must send a written statement that discloses:
- the right to cancel or terminate the PMI.
- an address and telephone number to contact the loan servicer to determine when the PMI may be canceled.
After the cancellation or termination of PMI coverage, a servicer must:
- within 30 days, notify the borrower that:
- the PMI has been terminated; and
- no more PMI premiums are due.
- within 45 days, refund any unearned premiums to the borrower.
The content of these disclosures will vary based upon whether:
- the loan is designated as a high-risk loan.
- the loan has a fixed rate or variable rate.
- For a fixed-rate loan, the notice must indicate the automatic termination date based on the date in the payment schedule where the loan-to-value ratio is projected to reach 78 percent of the original value.
- For a variable-rate loan, the notice must indicate that the lender must provide notification when:
- the loan has reached a point where the borrower may request PMI cancellation; and
- PMI will automatically terminate.
- the PMI is paid by the borrower or lender. Lender-paid PMI (LPMI) requires disclosure of how it differs from borrower-paid PMI. Because the cost of lender-paid insurance is compensated for in the interest rate, it is tax deductible (although it is not subject to borrower cancellation). Borrower-paid PMI is not tax deductible for a borrower with an income of more than $100,000, but it may be canceled.
One way lenders have helped borrowers avoid the cost of mortgage insurance is through piggyback financing (i.e., simultaneous loans), which combines an 80 percent first loan with either:
- a 20 percent second loan;
- a 15 percent second loan and a 5 percent down payment; or
- a 10 percent second loan and a 10 percent down payment.
However, provisions of the amended TILA and Regulation Z require a lender to ensure that the borrower has the ability to repay any loans secured by the same collateral, according to their terms.