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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!
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.
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”.
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.
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.
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 rateI 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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