Reply To: Loan Product Change due to ATR


Jack and I discussed your question and here are a few points from our conversation:
• The loan is an ARM – that would seem to offset most interest rate risk, so why is there a need for a call feature?
• The loan has a variable rate and we assume it has standard default clauses. If your bank calls a loan for something other than an interest rate issue, which shouldn’t exist since it is a variable rate, or for standard default, the use of the call may be deemed unfair.
• Fair lending could arise if certain customers get the product with the call and others get it without the call.
• The call feature appears to be an unnecessary feature, but we don’t see any clear violation associated with it.