The following is a recent letter from the Chairman of the North Carolina Real Estate Licensing Board to Mr. Chet W. Snow, President of the North Carolina Association of REALTORS, setting forth the Licensing Board's position regarding the advertising of variable rate loans. All licensees should be aware of the requirements for advertising such financing.

Dear Chet:

The Real Estate Licensing Board has noticed that many real estate brokers are now advertising that certain "special financing" is available to their customers. For example, their ads will state "12 3/8% mortgage money available" or "12 3/8% special financing". However, upon investigation we have found that the interest rates referred to in the advertisements are actually only the "face rate of interest", and that they are, in fact, "variable" or "adjustable" rates which are subject to increase over the life of the loan.

While the Board does not wish to restrict in any way the advertisement or promotion of these new and innovative forms of mortgage loans, nevertheless we are of the opinion that such advertising should clearly disclose to the reader that the interest rate is subject to change-a fact which would be of considerable importance to most potential borrowers.

Therefore, the Board wishes to inform brokers that

WHEN ADVERTISING INTEREST RATES WHICH ARE SUBJECT TO INCREASE DURING THE TERM OF THE LOAN, THE WORDS "VARIABLE RATE" OR "ADJUSTABLE RATE" OR SIMILAR WORDS MUST BE USED TO ACCURATELY DESCRIBE THE TYPE OF FINANCING BEING OFFERED. [ALSO, THE RATE MUST BE STATED AS AN "ANNUAL PERCENTAGE RATE", USING THAT EXACT TERM (Federal Regulation Z').]

The Real Estate Licensing Board would very much appreciate your assistance in disseminating this information to the members of your Association.

With best wishes I remain

Yours very truly,

BRANTLEY POOLE Chairman North Carolina Real Estate Licensing Board

1 According to the Board of Governors of the Federal Reserve System, the annual percentage rate for variable rate loans should be calculated and disclosed using the rate in effect at the time the transaction is consummated. (For further information regarding Regulation Z, contact the Federal Reserve Board, Division of Consumer and Community Affairs, 20th and C Streets, Washington, D. C. 20551, Phone: 202/452-3867.)