I would like to get a second opinion on my interpretation of the 1026.20 notice. I had initially thought that the rate adjustment notice would apply for our loan modifications that have a step rate adjustment. (HAMP step rate modifications)

But then I read the commentary:

2. Non-adjustable-rate mortgages. The following transactions, if structured as fixed-rate and not as adjustable-rate mortgages based on an index or formula, are not subject to § 1026.20(d):

i.. Shared-equity or shared-appreciation mortgages;

ii. Price-level adjusted or other indexed mortgages that have a fixed rate of interest but provide for periodic adjustments to payments and the loan balance to reflect changes in an index measuring prices or inflation;

iii. Graduated-payment mortgages or step-rate transactions;

iv. Renewable balloon-payment instruments; and [i][/i]

v. Preferred-rate loans

When I read this it looks like TILA does not define a step rate as an ARM so we would not need to follow the 26.20 rules.

Thanks for any second opinions, I just need to gain confidence that I am understanding this correctly.

You are correct.

As always, Thanks for your input!!