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#2195206 - 10/11/18 03:05 PM Can this amount increase after closing?
Likes to Comply Offline
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In the mountains
I've gone through the rules (Appendix D #7.iv.B, comments 37(b)(6)-1, 37(a)(10)-3 and 37(b)(8)-1) for disclosing the information under Monthly Principal & Interest > Can this amount increase after closing?

For a 11 month interest only (fixed rate) with 12 month balloon payment and 1/2 construction line drawn assumption, OnBoard is disclosing the following on the LE

> Adjusts every month starting in month 1
> Can go as high as $XXX in month 2
> Includes only interest and no principal until year 1
> See AP Table on page 2 for details

I think that "Can go as high as $XXX" should say either "in year 1" or maybe even "in month 1" but I'm not completely sure. The example given in the appendix on a 10 month construction loan used "in year 1" for this statement.

I also think that "Includes only interest and no principal until" should say "the eleventh month".

Am I on the right track? I'll may have to go to battle with the vendor so I want to be sure I understand this correctly.

Thanks in advance.
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#2195209 - 10/11/18 03:20 PM Re: Can this amount increase after closing? Likes to Comply
John Burnett Offline
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John Burnett
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Yes, the "can go as high" statement should point to month 1 (theoretically, all funds could be disbursed on day 1).

As for "Includes only interest and no principal until ..." I'd say "month 12" or "maturity." (Year 1 might be technically OK since you can use months or years, but I think month 12 is much more accurate and I don't like combining months and years in the same table item).
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#2195214 - 10/11/18 03:39 PM Re: Can this amount increase after closing? Likes to Comply
rlcarey Offline
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rlcarey
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Galveston, TX
Includes only interest and no principal until month 11 is the correct answer on a 12 month interest only loan.
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#2195215 - 10/11/18 03:40 PM Re: Can this amount increase after closing? Likes to Comply
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You are right, the 12th month would be the month it would no longer be interest with no principal. I was reading that incorrectly before.
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#2195250 - 10/11/18 06:35 PM Re: Can this amount increase after closing? Likes to Comply
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Posts: 1,060
In the mountains
We got a response back from the Vendor and the reason they are putting month 2 for "Can go as high as $XXX in month 2" is that the system will put the first month in which there is 31 days. So if the first payment is in a month with 30 days, then it will show "month 2" since technically that month would have one more day's interest in the payment due.

I guess that is true...
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#2195279 - 10/11/18 09:05 PM Re: Can this amount increase after closing? Likes to Comply
John Burnett Offline
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John Burnett
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Cape Cod
Sounds like an excuse designed to avoid the question. Have they forgotten the rule that you can (not must) ignore the fact that months have different numbers of days?
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