[rcooper]

This question was originally posted in our Compliance Master Group forum by mbarnes.

We have been reading 1026.20(c) and 1026.20(d) and we think we understand the 60-120 day ARM Notice but we are having a hard time understanding the 210-240 days ARM Notice.

From what we are reading these are 2 separate notices. Is the 210-240 days Notice letting the consumer know that their fixed rate period is about to end and the notice is giving them an estimate of what the new rate will be and the new payment. Then the 60-120 day Notice is letting the consumer know the actual new rate and new payment.

Are we reading this correctly?

[rcooper]

You are correct. The 210-240 notice is intended to give the borrower notice that the rate will be changing and to give them an estimate of what that rate will change to (if you know what that rate will be at the time you make the initial/210-240 notice you will need to put it in, but most creditors won’t know the rate this far in advance so an estimate is sufficient – see the details of 1026.20(d)). This would ideally give them time to shop around for a new loan if they can’t afford the new rate.

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[Marcella]

When is the Initial rate adjustment notice (210-240 days) due when the ARM term is 1 year?

[rcooper]

If the first payment at the adjusted level is due within the first 210 days after consummation, the disclosures shall be provided at consummation.

[Author]

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