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#1138634 - 03/02/09 10:52 PM ARM Disclosures - balloon and payment example
CalifDreamin Offline
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CalifDreamin
Joined: Mar 2002
Posts: 2,262
Far from Calif
In light of changes in the market and to watch interest rate risk, our loan officers are going to start doing 10 year balloons on loans that amortize 15+ years. Currently, the payment example in our ARM disclosures is generally for 15 or 30 year amortizations. In looking at the commentary to 226.19(b)(2)(viii(A)-5, we don't need to change that. Am I reading this correctly? So, I'm thinking we may not really need to change our ARM disclosures at all - everything will be the same, except that the maturities will now be shorter than the amortizing period.

Thank you for your help!
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Lending Compliance
#1138672 - 03/03/09 03:05 AM Re: ARM Disclosures - balloon and payment example CalifDreamin
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
You cite the correct portion of the regulation, the Commentary to 226.19(b)(2)(viii)(A)(5).

But you need to pay particular attention to the following of that section:

ARMs with terms or amortizations from over 1 year to 10 years may be based on a 5-year term or amortization; ARMs with terms or amortizations from over 10 years to 20 years may be based on a 15-year term or amortization; and ARMs with terms or amortizations over 20 years may be based on a 30-year term or amortization.

If your amortization is 1 - 10 years then you use a 5 year amortization, if the amortization is 10 to 20 years then you use a 15 year amortization and if the amortization is greater than 20 years then you use a 30 year amortization.

As long as your current disclosures follow this guideline then you should be OK.
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#1138751 - 03/03/09 01:51 PM Re: ARM Disclosures - balloon and payment example Dan Persfull
CalifDreamin Offline
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CalifDreamin
Joined: Mar 2002
Posts: 2,262
Far from Calif
Thanks, Dan! Yes, the terms will be less than 10 yrs, but they will all amortize over 15-30 years. So, I'm thinking to keep the number of disclosures we have to create to a minimum, we could do two payment examples - one showing the amortization at 15 yrs. and one showing the amortization at 30 years.

I appreciate that you responded so quickly!
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