Currently we have 4 ARM products that we offer to our customers. Recently we've had discussions with a couple of lenders who want to create an ad hoc ARM product to negotiate better terms with the customer. Is that permissible? Also, is it fair that these certain customers can negotiate to obtain the different product but we only offer our normal programs to other applicants?

Quick trip down the potential fair lending violation road if you ask me. What is good for one is good for all.

Totally agree with Randy.

That was our initial concern. Thank you!

Many years ago, my bank bought a smaller bank that did more-or-less what you described. The only problem was that they didn't or couldn't service the loans according the the one-of-a-kind VR notes. Years passed, we entered the picture, and TOOK A BATH cleaning up the mess. Every loan note had to be analyzed (by attorneys and experienced lenders), all payments were ripped off, and then (using the rates and methods actually stated in the notes) all payments were reapplied. Overpayments (there were many) were refunded...not at the note rate, but rather at our state's (higher) legal rate. The moral of this tale of woe is that you set yourself up for mismanagement of a portfolio when you allow deviations from your established products.