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#2146104 - 09/14/17 05:21 PM ARM Rate changed after ARM disclosure given
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,935
Idaho
We have a situation where we gave the initial ARM disclosure at application as required. However, we later granted a rate exception to lower the start rate. Are we required to give an updated initial ARM disclosure that shows the new start rate as a discounted rate?

Thanks!
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Lending Compliance
#2146105 - 09/14/17 05:23 PM Re: ARM Rate changed after ARM disclosure given TMatt87
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,951
Galveston, TX
Paragraph 19(b)(2)

2. Variable-rate loan program defined. i. Generally, if the identification, the presence or absence, or the exact value of a loan feature must be disclosed under this section, variable-rate loans that differ as to such features constitute separate loan programs. For example, separate loan programs would exist based on differences in any of the following loan features:

H. The presence of a discount feature.
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#2146113 - 09/14/17 06:03 PM Re: ARM Rate changed after ARM disclosure given TMatt87
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,935
Idaho
So we added a discounted start rate right before closing. The ARM disclosure is required to be given "at the time an application form is provided or before the consumer pays a non-refundable fee, whichever is earlier."Obviously, in our case, the discount feature was added after the application was provided.

So, it doesn't sounds like you can change the program after the initial ARM disclosure is provided and still comply with 1026.19(b), even if it was the borrowers request.

Would we have to consider the original application withdrawn and start a whole new application in order to make the change?
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#2146120 - 09/14/17 06:41 PM Re: ARM Rate changed after ARM disclosure given TMatt87
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,951
Galveston, TX
Paragraph 19(b)(2)

1. Disclosure for each variable-rate program.
If program disclosures cannot be provided because a consumer expresses an interest in individually negotiating loan terms that are not generally offered, disclosures reflecting those terms may be provided as soon as reasonably possible after the terms have been decided upon, but not later than the time a non-refundable fee is paid.If a consumer who has received program disclosures subsequently expresses an interest in other available variable-rate programs subject to 1026.19(b)(2), or the creditor and consumer decide on a program for which the consumer has not received disclosures, the creditor must provide appropriate disclosures as soon as reasonably possible.
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