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#1850807 - 09/10/13 10:36 PM Example Please - Estimate (ARM Notices)
GTS333 Offline
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With the timing requirement for the new Initial Interest Rate Adjustment Notice (1026.20(d)) that it be provided at least 210 but no more than 240 days out from the new payment date, will anyone NOT be using an estimate on that disclosure? I am looking for an example of when the servicer will actually know the new rate/payment that far out from the payment date, as typically the lookback periods are not that long.

Any good examples would be appreciated.
Thanks!
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#1852149 - 09/13/13 08:31 PM Re: Example Please - Estimate (ARM Notices) GTS333
GTS333 Offline
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<bump> Anyone?
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#1857074 - 09/30/13 08:38 PM Re: Example Please - Estimate (ARM Notices) GTS333
Compliance Nanny Offline
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Hello,

I think you and I think alike
Our core provider right now if offering two rate change notices. The "legacy" notice we are using now and the new notice (estimate) which can be sent up to 210-240 days before the change notice. From what I read this could be the only rate notice you choose.
My thoughts are we need to be able to send two notices first the 5/1 arm (wake up notice....your rate is changing estimate) then we would need to send the actual rate change notice 45 days prior. so our system needs to change to be able to send two notices one 210 days out and the regular 45 days out.
If we are to only send one notice which appears that some cores are only giving that option, then the only other thing to change would be the Note from 45 days to 210 days . Can anyone shed some light on this thought process

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#1857091 - 09/30/13 09:27 PM Re: Example Please - Estimate (ARM Notices) GTS333
Raquel Offline
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Look under 1026.20(d)(2)for the content requirements for the "New" ARM notice that must be given 210 to 240 prior to the first adjustment on an ARM. This says that if the new interest rate or new payment calculated from the new rate is not known as of the date of the notice, then an estimate must be disclosed and labeled as an estimate. The estimate must be based on the calculation of the index which was disclosed to the consumer and must use the index within 15 days prior to the date of the notice. See Model forms H-4(D)(3) and (4). The notice is only sent once in the life of a loan and is kind of a warning that the rate and payment will be changing.

Then 60 to 120 days before the payment is due at the new rate, a notice must be sent in accordance with 1026.20(c)requirements for those loans with lookback periods of 45 days or more. See the timing requirement in (c)(2) for additional information if lookback period is less than 45 days and loans was made prior to 1/10/15. See Model forms H-4(D)(1) and (2). This is the form that will be sent when the new interest rate and payment is known for the first and each subsequent change (very much like the current ARM notice requirements with slight modifications in format and of course the timing.)

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#1858313 - 10/03/13 08:58 PM Re: Example Please - Estimate (ARM Notices) GTS333
GTS333 Offline
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Compliance Nanny - See Raquel's post, she is correct. You would give the Initial (1026.20(d)) notice 210-240 days out from the payment date, and then the Subsequent (1026.20(c)) notice 60-120 (or differnt timing for one of the exceptions) days from that same payment date. After that, any time the rate changes, you'd just give the Subsequent notice 60-120 days out from the payment date.

My question related to whether anyone was aware of an example of any loans that had a sufficient look-back period for determining the new rate that they could use the real (not estimate) new interest rate and payment numbers on the Initial notice (other than if provided at consummation).
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#1858807 - 10/04/13 07:55 PM Re: Example Please - Estimate (ARM Notices) GTS333
John Burnett Offline
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I am not aware of any such loans currently. That is not to say, however, that this requirement won't generate interest in loan contracts that have look-backs to accommodate that window.
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#1864549 - 10/24/13 03:00 PM Re: Example Please - Estimate (ARM Notices) GTS333
Compli(cated) Offline
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If I am understanding correctly, the second notice (under 1026.20(c)) does not allow estimates.

Our lookback period is 45 days (not less than 45), meaning that the notice has to be sent at least 60 days in advance - any guidance on how the payment should be calculated in this situation?
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#1864565 - 10/24/13 03:19 PM Re: Example Please - Estimate (ARM Notices) GTS333
rlcarey Online
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The disclosures shall be provided to consumers at least 25, but no more than 120, days before the first payment at the adjusted level is due for ARMs with uniformly scheduled interest rate adjustments occurring every 60 days or more frequently and for ARMs originated prior to January 10, 2015 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
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#1864577 - 10/24/13 03:28 PM Re: Example Please - Estimate (ARM Notices) GTS333
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Thanks Randy, but we are at 45 days, not less than 45 days - how would this be applied?
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#1864597 - 10/24/13 03:44 PM Re: Example Please - Estimate (ARM Notices) GTS333
rlcarey Online
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When does the rate change and when is the new payment due? From the preamble:

Through outreach to servicers of adjustable-rate mortgages, the Bureau learned that, for most ARMs, servicers knew the index value from which the new interest rate and payment would be calculated at least 45 days before the date of the interest rate adjustment. Because interest on consumer mortgage credit generally is paid one month in arrears, this meant that, for most ARMs, servicers would know the index value approximately 75 days before the due date of the first new payment, depending on the number of days in the month during which interest began accruing at the new rate.
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#1864730 - 10/24/13 06:33 PM Re: Example Please - Estimate (ARM Notices) GTS333
Compli(cated) Offline
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Thanks Randy. I had to re-ask our lending people several times and in several different ways, but I finally got an answer confirming that this scenario would apply and that the payment would not go up on day 45.

Appreciate your help!
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#1864749 - 10/24/13 06:56 PM Re: Example Please - Estimate (ARM Notices) GTS333
ahanna Offline
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Randy - sorry to be a stick in the mud, but I was looking for an answer to this question today as well and I am still confused... please bear with me. smile

How does the exception apply to a lookback period of exactly 45 days instead of "less than 45 days" from the adjustment date (not the new payment date)?
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#1864752 - 10/24/13 07:06 PM Re: Example Please - Estimate (ARM Notices) GTS333
ahanna Offline
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Texas
Wait... maybe we don't need the exception after all. Our notices are currently sent out around 44 days before the adjustment date (the business day after it is set by the 45-day lookback), so that's around 74 days before the new payment date. This timeframe already complies with the new requirement of 60-120 days before the new payment date.

Am I thinking through this correctly? I think I was just reading myself in circles!
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#1864842 - 10/24/13 09:13 PM Re: Example Please - Estimate (ARM Notices) GTS333
rlcarey Online
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That would be correct.
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