That is what I thought.. so if we had a 10/1 ARM and have a floor, the lowest possible payment in year 11...that time period, is the floor....... Examiner is stating it should be the fully indexed rate. Ex: Let's say the floor rate is 3.25 , But the index was 1.55 + margin of 2.75 at the time of the LE. We are giving the lowest possible payment at the 1st change year 11 using 3.25% because that is as low as it can go. They are saying it should be based on index at the time of the LE 1.55 + 2.75 margin because that is the fully indexed rate (but it may not be at that time), the index could go back down in 10 years and be even lower than the floor. Right? Am I missing something that says we have to go with the fully indexed rate when doing the projected payments if initial rate is considered a discount rate because it is less than the current index + margin? This even says to keep in mind lifetime interest rate floor.
2.2.3.BGenerally, calculate Principal & Interest using the maximum payments by assuming that the interest rate will rise as rapidly as possible, taking into account the terms of the legal obligation, including any applicable caps on interest rate adjustments and lifetime interest rate cap. Other laws, such as a State usury law, can set the maximum rate if the legal obligation does not include a lifetime interest rate cap. Calculate the minimum payments by assuming that the interest rate will decrease as rapidly as possible, taking into account any introductory rates, caps on interest rate adjustments, and lifetime interest rate floor. For an Adjustable Rate loan based on an index that has no lifetime interest rate floor, the minimum interest rate is equal to the margin. (Comment 37(c)(2)(i)-1)