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#2271540 - 06/10/22 07:38 PM Initial Rate Adjustment - Include Rounding?
Likes to Comply Offline
Diamond Poster
Joined: Nov 2008
Posts: 1,064
In the mountains
Since our system did not create an initial rate adjustment disclosure, we have created one to use until it gets worked out with the vendor.

Based on 1026.20(d)(2)(iv)(B) and 1026.20(d)(2)(vi)(B) saying to disclose any adjustment to the index, my question is - should we disclose the rounding that we do the the index + margin in the same manner we do on the Note and the Early/Application ARM disclosure?

For example:

Interest Rate: We calculated your interest rate by taking a published "index rate" and adding a certain number of percentage points, called the "margin", then rounded to the nearest 0.125%. Under your loan agreement, your index rate is the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year (1 Year Treasury Index) and your margin is 2.50%. The 1 Year Treasury Index is published weekly in The Wall Street Journal.

New Interest Rate and Monthly Payment: The table above shows our estimate of your new interest rate and new monthly payment. These amounts are based on the 1 Year Treasury Index as of now and your margin, rounded to the nearest 0.125%, your loan balance of $164,388.81, and your remaining loan term of 204 months. However, if the 1 Year Treasury Index has changed when we calculate the exact amount of your new interest rate and payment, your new interest rate and payment may be different from the estimate above. We will send you another notice with the exact amount of your new interest rate and payment 2 to 4 months before the first new payment is due, if your new payment will be different from your current payment.

Thanks in advance!
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Lending Compliance
#2271659 - 06/15/22 12:47 PM Re: Initial Rate Adjustment - Include Rounding? Likes to Comply
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
Of course, you would. Look at Model H-4(D)(3).

Under the paragraph entitled "Interest Rate", see the last sentence: (Description and amount of other adjustment(s) to the Index.)
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