TRID Clarification on disclosing CP loans

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• August 29, 2017 at 9:15 am EDT #11649
  Michelle

  Member

  Our Bank offers a 30 year 7/1 ARM Construction to Perm loan product with the first year interest only with the remainder of the loan as full P&I payments. At the start of TRID, our LOS systems were not supporting this product appropriately and we were using an outside lawyer to disclose. Our LOS systems are now able to handle this product, and we are conducting testing of the disclosures. The Product on the LE is showing as 1 year interest only, 6/1 ARM. All other information on the LE is accurate; the Projected Payments table, AIR table, etc. However, we would like to confirm this is the proper way to disclose this product, and if any other banks are disclosing a similar product the same way. Thank you!

  August 29, 2017 at 9:21 am EDT #11650
  kmeade

  Participant

  I’m interested in a response to this question as well

  August 30, 2017 at 4:08 pm EDT #11655
  jholzknecht

  Keymaster

  Michele,

  Are you questioning the product description? You described it as a 7/1 ARM. Is the rate fixed for the first 7 seven years with interest only payments for the first 12 months and fully amortizing payments for the next 6 years? If so a description of “1 year interest only, 7/1 Adjustable rate” would appear appropriate.

  August 31, 2017 at 8:52 am EDT #11658
  Michelle

  Member

  Yes, the product description is in question. Yes, that is the loan product structure; however the LOS is disclosing as “1 year interest only, 6/1 ARM”.

  August 31, 2017 at 8:58 am EDT #11659
  jholzknecht

  Keymaster

  You should discuss this with your LOS vendor. You may be entering the data into the system incorrectly or it could be a system error. A 7/1 should be a 7/1.

  August 31, 2017 at 9:04 am EDT #11660
  Michelle

  Member

  Thank you. We have discussed with our LOS and they are saying this is the proper way to disclose this loan; however we wanted to get another opinion. We are in agreement that a 7/1 should be disclosed as a 7/1, but getting a different opinion from the LOS.

  September 28, 2017 at 3:35 pm EDT #11828
  Chris

  Member

  Michelle, we are doing a similar product (testing mode at present) through LaserPro. Ours is a 5/1 ARM, one year of interest only payments, followed by 48 months of P&I payments – so that is the first 60 months at one rate, and then after that point, the rate can change annually for the remaining 300 payments.

  On our LE & CD, the product description is:
  1 year interest only, 5/1 Adjustable rate

  I am of the same opinion as Jack – the ARM portion of the description should read 7/1, not 6/1, if the first year (interest only) is part of the first 7 years at the initial rate.

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