I need some clarification as to whether a Federal PMI Disclosure is required on a Fixed-ARM 7/1? We have a compliance resource containing a federal disclosure matrix that indicates a PMI Disclosure is required on a Fixed-ARM loan. It references the column Citations and Federal Agencies: FDIC, NCUA, CFPB and FCA. However, our bank is regulated by the Federal Reserve Bank of San Francisco (FRBSF) and it was not referenced as one of the agencies. If anyone could please provide some guidance, I would greatly appreciate it.

Best Regards,

I need clarification as to whether a Federal PMI Disclosure is required on a Fixed-ARM 7/1? We have a compliance resource containing a federal disclosure matrix that indicates a PMI Disclosure is required on a Fixed-ARM loan. It references the column Citations and Federal Agencies: FDIC, NCUA, CFPB and FCA. However, our bank is regulated by the Federal Reserve Bank of San Francisco (FRBSF) and it was not referenced as one of the agencies. If anyone could please provide some guidance, I would greatly appreciate it.

ARM loans must receive the required disclosure outlined in the Homeowners Protection Act Section 4903. They do not however require an amortization schedule be provided.

For clarification purposes, the PMI disclosure would be still be required for a loan that's a Fixed-Adjustable loan?

Explain what you mean by a "Fixed-Adjustable" loan.

If you are referring to a 3/1, 5/1 or 7/1 ARM they are adjustable rate loans, they are not fixed rate loans.

Hi Dan,

That's exactly what I'm referring to. For instance, the loan that I'm currently reviewing is a 7/1 ARM. However, on the Note it's reflected as Fixed/Adjustable Rate Note. Means the loan is fixed for the first 7 years, then it adjusts every year thereafter.

on the Note it's reflected as Fixed/Adjustable Rate Note

In all my years in the business I have never seen an ARM referred to as a Fixed/Rate Adjustable Loan and I certainly have never seen them referred to as such in the note.

Regardless though under the regulations they are Adjustable Rate Mortgages and you would have to provide the applicable adjustable rate PMI disclosure under the requirements of 4903.

Dan,

Would the PMI Disclosure under Section 4903 still be required, even if there's a PMI Notice in the file? This particular disclosure that I'm referring to is called a California Private Mortgage Insurance Notice which is required under CA Civil Code Section 2954.7, which is state disclosure provided at closing. It appears that we must provide the PMI Disclosure under the Homeowners Protection Act, as it would be considered a federal disclosure. We've never been involved with PMI loans, so we began this as a pilot program around February of this year.

I can't address your state specific question because I have no idea what the state law requires but you are correct in that you do have to comply with the Federal requirements of HOPA.

Great! Thanks for providing clarification on the subject matter. I did not see any PMI Disclosures for 3 loans that consisted of PMI exceeding the 80% LTV threshold. This will certainly be a violation of HPA. Would the PMI Disclosure be required at closing?

Sec. 4903: Disclosure requirements (01/19/04)


(a)Disclosures for new mortgages at time of transaction

(1)Disclosures for non-exempted transactions In any case in which private mortgage insurance is required in connection with a residential mortgage transaction (other than a residential mortgage transaction described in section 4902(g)(1) of this title), at the time at which the transaction is consummated, the mortgagee shall provide to the mortgagor -


PS. Once you examine the disclosure requirements in 4903 review the required state disclosure. Its wording may meet the Federal requirements and may be compliant for both state and Federal requirements. You just need to be sure it has the applicable language for whether the loan is a fixed rate loan or an ARM.

From 4903:

(d)Standardized forms The mortgagee or servicer may use standardized forms for the provision of disclosures required under this section, which disclosures shall relate to the mortgagor's rights under this chapter.

Thank you so much. I will review the state disclosure.