[Mary Frances]

We had a glitch in our core system where an Initial ARM Rate Notice did not print for a borrower. We have identified the issue and corrected the core system. The rate adjusted in February this year and the borrower did get the 45 day ARM Rate Notice. From May 2019 to May 2023 the borrower was not living in the property as their primary residence so we reviewed 1026.18(f)(1) which says it applies to variable-rate transactions that are not secured by the consumer’s principal dwelling and to those that are secured by the principal dwelling but have a term of one year or less… What are our options to correct this? Should we change the rate back to the original rate and allow our system to do an interest adjustment and give them another year at the lower rate or is it ok to leave the loan as is because they were not using the home as their primary residence? Is there any other restitution that we may need to consider? We also had a loan that paid off 8 days after the rate changed that did not receive an initial ARM Rate Notice. Do we need to make any kind of restitution for this loan?

[Kimberly Boatwright, CAMS, CRCM]

This question is best answered by your FIs attorney. IMO, anytime restitution/rate change is being discussed you would want a legal opinion to ensure both the FI and Customer are properly covered and protected.

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