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#1798815 - 03/27/13 04:37 PM ARMs with short look-back periods
GTS333 Offline
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Joined: Jun 2010
Posts: 257
I have what I hope is not a silly question regarding existing ARM loans with short interest-rate look-back periods for purposes of the revised 1026.20(c) ARM notices.

I see in the 1/10/2014 TILA Servicing Rule that the CFPB provided an exception to the new 60-120 day timing requirement for the 1026.20(c) notices for ARMs originated prior to 1/10/15, in which the loan contract requires the adjusted interest rate and payment to be calculated based on the index figure available as of a date that is less than 45 days prior to the adjustment date. Essentially, this appears to be a limited grandfather provision that allows existing ARMs that couldn’t otherwise determine the new interest rate in time to comply with the 60-120 day disclosure window to disclose under the current 25-120 timeframe. Since this exception expires on 1/10/15, my question is, how will these loans be corrected/tied to a different index between 1/10/14 and 1/10/15? Do they need to be refinanced in order to change to an index that has a 45 day or longer look-back period?

I see that the CFPB noted that most loans have 45 day or longer look-back periods, so this won’t be a problem for most, but they also noted that many ARMs backed by FHA/VA have look-back periods of 15 or 30 days. Anyone know how they will address these loans during this one year exception period?

Apologies in advance if this is a silly question, or if I’ve missed something obvious.

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#1799737 - 03/29/13 06:01 PM Re: ARMs with short look-back periods GTS333
GTS333 Offline
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Joined: Jun 2010
Posts: 257
A related question, it looks to me like the grandfather timing provision for ARMs originated perior to 1/10/15 is only applicable to the 1026.20(c) subsequent interest rate adjustment notices. So that would mean that those loans would still need to receive the new unique initial interest rate adjustment notice (1026.20(d)) in accordance with it's time-frames (210-240 days). Is that how everyone else is reading the rule?
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My opinion, take it for what its worth. Opinions expressed are my own and not those of my employer and are not legal advice.

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#1800421 - 04/02/13 02:53 PM Re: ARMs with short look-back periods GTS333
GTS333 Offline
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Joined: Jun 2010
Posts: 257
After looking at the rule more closely, I reazlie that the 25-120 unique timeframe for loans with shorter than 45 day look-back periods is a permanent exception for all loans originated prior to 1/10/15. So, no need to address these loans, only to be sure to originate loans with 45 day or longer look back periods as of 1/10/15. My mistake.
_________________________
My opinion, take it for what its worth. Opinions expressed are my own and not those of my employer and are not legal advice.

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