ARM (LIBOR) Interest-only Loan Calculation - Richard Insley

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ARM (LIBOR) Interest-only Loan Calculation
by Richard Insley, BOL Guru
BIO AND CONTACT INFO

Question: This has to do with ARM (LIBOR) interest-only loans. On our final TIL disclosure schedule of payments it shows that the amount of payments have decreased. This is due to historical low interest rates. Obviously, the calculation or formula is not shown on the TIL. However, in order for our IT department to program our system to calculate this type of loan product, I need a basis for the calculations. My question to you: is there a particular Web site that shows exactly how to calculate the ARMS interest only based on LIBOR index (decrease payments)? I've spent the past few days surfing various Web sites (including OTS, OCC, and Treasury) regarding this question to no avail.

Answer: No. The closest thing you'll find is Comment #10 to Section 226.17(c)(1) of Reg. Z.

First published on BankersOnline.com 8/18/03

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