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#1530332 - 04/01/11 03:46 PM Reg Z Rate & Payment Disclosures
Mainiac Offline
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Posts: 147
I hope someone can help me with a question on the new Reg. Z rate and payment TIL examples.

We have 5/1 and 7/1 ARM products, meaning the intial rate is fixed for 5 years or 7 years, respectively. Obviously, there are no rate changes during the first 5 years for these products. Is it acceptable to omit the "Maximum During First Five Years" column and just have the "Introductory Rate" and "Maximum Ever" columns?

Thanks

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#1536700 - 04/18/11 03:32 PM Re: Reg Z Rate & Payment Disclosures Mainiac
Patricia Offline
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Kansas
bump

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#1536709 - 04/18/11 03:43 PM Re: Reg Z Rate & Payment Disclosures Patricia
AFaquir Offline
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No... you will need all three columns. In the discussion of 5/1 and ARM's you should still use the middle column and repeat the rates and the payments, because in point of fact that is the maximum for the 5 years. This logic (if you can call it that) also applies to your 7/1

There was some definite fuzzy area regarding the "dates" for the maximum 5 years but it was my understanding that since the rate effectively changes on the day after the anniversary of the 5 years since origination, you should not use the 5 year rate change in that box, Instead you repeat the initial rate.

Ordinarily I would have some information supporting this, but I brain dumped most of it after we perfected our LOS printouts. That said I am 99.9% positive about this.

Cheers!
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#1536750 - 04/18/11 04:20 PM Re: Reg Z Rate & Payment Disclosures AFaquir
starfish Offline
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starfish
Joined: Jun 2003
Posts: 416
Seattle
There are additional revisions to Reg Z that are mandatory as of 10/1/11. You will need to base your disclosures on the first five years after the first regular periodic payment due date, rather than the first five years after consummation. This clarification is intended to ensure the disclosures are consistent with the manner in which payments are typically structured for ARM transactions that are 5/1 ARM loans.

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#1536845 - 04/18/11 05:05 PM Re: Reg Z Rate & Payment Disclosures starfish
Princess Romeo Offline

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Anyone else here find that the new payment tables convey less useful information and are way more confusing than the old payment schedule?

IMHO - they should have left the payment schedule intact and simply added an ARM section that would state the highest possible payment amount on the first rate change, the date of that first rate change, and then the highest possible payment amount for the loan and the date by which that could occur.

I think this new disclosure format does a disservice to consumers.


Here would be my example for a discounted 5/1 ARM put in a table format where the payment amount is in a column to the right labeled LOAN PAYMENT. The additional payments would go in a column on the far right labeled ADDITIONAL PAYMENTS ADDED TO THE LOAN PAYMENT.

INITIAL PAYMENT SCHEDULE (Subject to change after 60 months)
60 payments beginning May 1, 2011: $1,025.58
300 payments beginning May 1, 2016: $1,250.75

The above payment schedule is based on a current index rate of .275%.

POSSIBLE CHANGES TO YOUR PAYMENT SCHEDULE:
If that index rate goes up, your payments could increase as follows:
Payments starting May 1, 2016 could go as high as: $1,362.53
Your interest rate and payment are subject
to change every 12 months after.
If the index rate continues to remain at a
high level, your highest payment could be as early as:
May 1, 2017: $1,782.53

ADDITIONAL REQUIRED PAYMENTS:
In addition to the principal and interest payments, you are required to pay the following items:
Private Mortgage Insurance: $98.00
Per month for at least 70 months.
Property Tax monthly payments starting at: $112.00
Insurance monthly payments starting at: $75.00

Property tax and Insurance payments may
increase if taxes and insurance premiums
increase.



Well - it's a thought.......
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#1536950 - 04/18/11 06:42 PM Re: Reg Z Rate & Payment Disclosures Princess Romeo
starfish Offline
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Seattle
PR- I love the example you've given. I completely agree that the new TIL is confusing....maybe you could pass along your suggestion to the CFPB?

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#1537061 - 04/18/11 08:35 PM Re: Reg Z Rate & Payment Disclosures starfish
Princess Romeo Offline

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Where the heart is
Originally Posted By: starfish
PR- I love the example you've given. I completely agree that the new TIL is confusing....maybe you could pass along your suggestion to the CFPB?


Would love to but I am not sure if they are in a receptive mood. I have yet to hear back from them on a couple of other suggestions I sent.

BTW - I also have a plan to re-organize and streamline Regulation Z. If anyone is interested, I'll post it as a new topic.
_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#1546720 - 05/05/11 06:06 PM Re: Reg Z Rate & Payment Disclosures Princess Romeo
river girl Offline
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Joined: Nov 2004
Posts: 1,004
We have fixed rate loans with private mortgage insurance paid monthly. Our loan software automatically pulls in the lower payment (after PMI is off the loan) but I think this will be confusing to the borrower.
Example: P&I 1137.93
PMI and tax/ins 289.17
Monthly payment 1427.10

But the P&I payment for the first 21 months of the loan is really 1165.20 then it drops to 1137.93.
How do I properly list the payment?
Last edited by river girl; 05/05/11 07:34 PM.
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#1558242 - 05/27/11 09:26 PM Re: Reg Z Rate & Payment Disclosures river girl
Beth175 Offline
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Beth175
Joined: Feb 2009
Posts: 151
Wisconsin
I believe you need to show the highest payment including MI and then also the payment without MI. You should have at least 3 columns on your disclosure.

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#1558415 - 05/31/11 02:34 PM Re: Reg Z Rate & Payment Disclosures Beth175
starfish Offline
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starfish
Joined: Jun 2003
Posts: 416
Seattle
I believe that for fixed rate loans, you should be showing the payment amount that includes mortgage insurance- that is the amount they will be paying initially and is the highest amount they will pay. We use 2 different loan doc systems within our institution and we're also rolling out a new mortgage system. It seems all of the doc systems have some type of issue with mortgage insurance disclosing correctly.

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