Regulation Z requires lenders disclose to borrowers of an adjustable rate mortgage the index or formula used in making payment or interest adjustments, a source of information about the index or formula, and statements that consumers should ask about the current margin value and current interest rate. The disclosure must indicate whether the interest rate will be discounted and state that the consumer should ask about the amount of the interest rate discount (12 CFR §1026.19).
The standard ARM Disclosures have been revised to move the sentence “Ask us for our current interest rate and margin” to the bullet immediately above its previous placement. In addition, the following text will print for ARM loans with a discount or premium:
“Ask us for the current amount of our adjustable-rate mortgage discounts or premiums.”
To illustrate, the following will print under “How Your Interest Rate and Payment Are Determined” if there is a premium:
- Your interest rate will equal the index rate, plus our margin, rounded to the nearest one-eighth of one percent (0.125%) unless interest rate “caps” limit the amount of change in the interest rate. Ask us for our current interest rate and margin.
- The initial interest rate will have a premium and will not be based on the index used to make later adjustments. Ask us for the current amount of our adjustable-rate mortgage discounts or premiums.
These changes will take effect on May 16, 2012. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
May 15, 2012