We have a 15 year ARM product with a set initial rate for a first lien primary residence transaction, but if it will be secured by a subordinate lien, then the initial rate is higher. Do I need two different ARM disclosures for this 15 year ARM product?

See 19(b)(2) - Comment 2

In addition, if a loan feature must be taken into account in preparing the disclosures required by §1026.19(b)(2)(viii), variable-rate loans that differ as to that feature constitute separate programs under §1026.19(b)(2).

That's what I thought, but I was hoping I was wrong.

Thanks very much for always helping me out!!! Have a good weekend.

What about 1026.19(b)(2) Comment 2 ii -

If, however, a representative value may be given for a loan feature or the feature need not be disclosed under 1026.19(b)(2), variable-rate loans that differ as to such features do not constitute separate loan programs. For example, separate programs would not exist based on differences in the following loan features:

A. The amount of a discount.

The rules throughout 1026.19(b)(2) for a discount generally applies to a premium rate.

So if the only difference is the premium rate is different for a FDOT than a SDOT, then even though the rate used in the maximum example would be different, wouldn't we still be ok to have one ARM disclosure since everything else is exactly the same?

Thanks in advance.

Well, if you have an ARM program and the discount might vary, say based on credit score - that would be true. But it sounds like you have two distinct ARM programs - for which you have different pricing, one for firsts and one for seconds. It is not that the discount is going to vary on either product - correct?

Its actually a premium rate, but yes, it will not vary based on credit score, etc. It is a set premium rate for a first lien and a set rate for a subordinate lien.

Well, then I think that probably weakens your argument. However, you can put both programs in the same disclosure - assuming that all the other terms and condition are the same. That way you still have one early disclosure and you don't really have to make a determination of the lien position when handing them out. It is only going to impact your variable rate examples, etc.

Thanks very much for the help!