Question:
We are working on the Reg. Z changes that came out Oct. 1, in relation to a higher price mortgage loan (HPML). We offer one, three, or five year ARM loans which meet the test for a HPML. All three of our ARM types originate at an index + margin (fully indexed rate) and are subject to an adjustment either at one, three or five years based on whatever the index is at that time plus the same margin the loan originated with. We assumed that we would have to calculate the repayment ability based on a worse case payment adjustment that could happen during the first seven years; however, I don't see an example for doing this in 226.34(a)(4)(iii)b. Do you believe that we are permitted to calculate the repayment ability based on the originating payment amount, because our rate is fully indexed at origination and subsequent adjustments are based on the current index rate at that time plus the same margin used at origination?
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