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#2254395 - 05/25/21 08:05 PM Early ARM Disclosure with discount rate
ComplianceKat Offline
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Joined: Sep 2017
Posts: 32
Unless I am mistaken, if an initial rate discount is offered to a borrower with a residential ARM product, then is the Payment Example within the Early ARM Disclosure also required to mention the rate discount too? Was unable to locate a sample or model verbiage after initial research. Any additional guidance reference would be very much appreciated. Thank you!

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#2254410 - 05/25/21 08:54 PM Re: Early ARM Disclosure with discount rate ComplianceKat
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 77,032
Galveston, TX
It is only found in the regulation and not in any of the models.

(B) The maximum interest rate and payment for a $10,000 loan originated at the initial interest rate (index value plus margin, adjusted by the amount of any discount or premium) in effect as of an identified month and year for the loan program disclosure assuming the maximum periodic increases in rates and payments under the program; and the initial interest rate and payment for that loan and a statement that the periodic payment may increase or decrease substantially depending on changes in the rate.
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#2254429 - 05/26/21 02:07 PM Re: Early ARM Disclosure with discount rate ComplianceKat
ComplianceKat Offline
Junior Member
Joined: Sep 2017
Posts: 32
Ok, understood. And in our case, the initial rate is not based on the index. We currently disclose the Initial Interest Rate Discount before the Payment Example and the Payment Example reads as follows: "....For example, on a $10,000, 30-year loan with an initial interest rate of 3.65% (the initial interest rate in effect May 2021, which is not based on the index in effect for May 2021)..." Does this not comply with Reg Z because the discount is not redisclosed with initial rate not based on index in payment example? Thank you.

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#2254441 - 05/26/21 03:19 PM Re: Early ARM Disclosure with discount rate ComplianceKat
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 77,032
Galveston, TX
No - I think covers it since there is not any other real guidance. .
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