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We are in the process of creating a new rate sheet which will have certain criteria where the rate could be lower or ever higher depending on the criteria. For example: Our 1 year ARM has a rate of 4.25%, 2/6 caps, Margin of Prime +1% and a floor of 4.25% so if we have a borrower and the LTV on the loan is between 50% – 65% then we will decrease their rate by .10 basis points to 4.15% which will make their floor rate 4.15% as well and the caps will remain the same and so will the margin.
For our Early ARM Disclosure would we need to have a disclosure for every rate scenario on our rate sheet? Right now our 1 year ARM Disclosure is based on term because the rate, margin, floor and caps are the same so we have 1yr ARM for 5 – 10yr term, 1yr ARM for 11 – 20yr term and 1yr ARM for 21 – 30yr term. Would we need to have an Early ARM Disclosure showing the lower rate of 4.15% as in the example above? Or could we do a worst case scenario and show the highest rate based on our rate sheet?
I have read the commentary for 1026.19(b)(2)(iv) which says “Because the disclosures can be prepared in advance, the interest rate and margin may be several months old when the disclosures are delivered. A Statement is required alerting consumers that they should inquire about the current margin value applied to the index and the current interest rate. For example, the disclosure might state “Ask for our current interst rate and margin”.
Any help would be appreciated
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