I would appreciate any expert confirmation of the following ARM payment calcs:

Interst Only - Use the higher of, fully indexed rate or initial rate, amortized over the remaining term as of the date the loan is recast. EX - 5-1 IO - amortized 25yrs at the higer of the fully ndexed rate or intial rate.

QM Amortizing Payment - Amortized payment as of the date of the recast, based on the maximum rate that may apply during the five years after the date on which the first payment will be due; Example: 5-1 ARM - 2/2/5/ caps - Payment calculation would be initial rate plus 2% amortized over 25 yrs. Thank you for your feedback.

We are wondering the same as Old School Banker. I am hoping you will tell me I'm wrong on the following:
3/1 ARM 2% PER PERIOD LIMIT, 6% LIFETIME UP CAP
NOTE DATE 2/1/2014 INITIAL RATE 2.99
FIRST DUE DATE 3/1/2014
FIRST RATE CHANGE DATE 2/1/2017
NEXT RATE CHANGE DATE 2/1/2018
3RD RATE CHANGE DATE 2/1/2019.
FIVE YEARS FROM FIRST PAYMENT DATE IS 3/1/2019. SO I HAVE TO USE WHAT THE RATE COULD POSSIBLY BE ON 3/1/2019 WHICH IN THIS CASE WOULD BE 8.99. CAN THIS BE RIGHT?

I would concur with your assessment that the loan should be underwritten at 8.99%. Obviously the CFPB does not like short term ARM products such as 3 or 5 year ARM loans.

Our legal counsel (a nationally recognized firm who sponsors webinars on QM/ATR) responded to my inquiry yesterday and validated my entry of 9/25 that these were correct.

What about a loan that is not interest only? Do we calculate 3 years from the first payment date or 5 years from the first payment date for a 3/1 ARM?