We have a Mortgage ARM loan with a 5-year interest-only period that then fully amortizes over the remaining term (with annual rate/payment changes). If the borrower makes a large principal paydown during the interest-only period, would we simply reflect that in the next periodic statement showing less interest is due? A Payment Change Notice is NOT required since it is specific to interest rate adjustments that cause the payment to change. Is that correct? Thank you!

I am confused - if it is in the interest only period - what is your other option?

You're right. After thinking about it some more overnight (always a good thinking time!) I realize that the next billing statement would simply reflect the amount of interest due on the outstanding principal during that billing period. Thanks for the response!