The creditor, assignee, or servicer of an ARM secured by a borrower’s principal dwelling must provide consumers with written notices in connection with the adjustment of interest rates in accordance with the loan contract that results in a corresponding adjustment to the payment. • Cost Details” section on the LE and the “Additional Information About This Loan” section on the CD, under the heading “Adjustable Interest Rate (AIR) Table,” that contains specified information about the index and margin, increases in the interest rate, initial interest rate, minimum and maximum interest rate, frequency of adjustments, and limits on interest rate changes. • “Annual Percentage Rate (APR)” and “Total Interest Percentage (TIP)” in the “Comparisons” section on the LE and the Loan Calculations section on the CD – Calculation of both of these values must account for variations in the interest rate permitted for the ARM. Interest rate/payment change notices The creditor, assignee, or servicer of an ARM secured by a borrower’s principal dwelling must provide consumers with written notices in connection with the adjustment of interest rates in accordance with the loan contract that results in a corresponding adjustment to the payment. These notices must be separate from any other disclosures or notices. There are exemptions for the following: ARMs with a term of one year or less; first interest rate adjustment to an ARM if the first payment at the adjusted level is due within 210 days after consummation and the new interest rate disclosed at consummation was not an estimate; or when the lender/servicer is subject to the Fair Debt Collection Practices Act (FDCPA) for the particular loan and the customer has sent a notice to cease communications. The content for these change notices is spelled out in Regulation Z, and the timing depends on whether the rate/ payment change is the first to occur for the ARM loan or a subsequent change. • The initial adjustment notice must be provided to consumers at least 210 – but no more than 240 – days before the first payment at the adjusted level is due. If the first payment at the adjusted level is due within the first 210 days after consummation, the disclosures must be provided at consummation. • All subsequent adjustment notices generally must be provided to consumers at least 60 – but no more than 120 – days before the first payment at the adjusted level is due. The disclosures must be provided to consumers at least 25 – but no more than 120 – days before the first payment at the adjusted level is due for ARMs with uniformly scheduled interest rate adjustments occurring every 60 days or more frequently and for ARMs originated prior to Jan. 10, 2015, in which the loan contract requires the adjusted interest rate and payment to be calculated based on the index figure available as of a date that is less than 45 days before the adjustment date. Periodic statements If your bank has taken advantage of the “coupon book” exception from periodic statements for mortgage loans with fixed rates, you will have to begin producing periodic statements when you begin originating ARMs. Or you will need to expand your statement output as more of the bank’s loan production shifts to ARMs from fixed-rate loans (if you still want to use the coupon books exception for your fixed-rate lending). Conclusion If your institution is like many community banks and has not been making ARMs for some time, you likely have some work to do to ramp ARM lending back up. Systems and disclosures need to be updated and/or activated. Disclosures need to be procured or prepared. Staff needs to be trained, at least some refresher training. Good luck re-ARMing up. William J. Showalter, CRCM, CRP, is a Senior Consultant with Young & Associates, Inc. (www.younginc.com), with over 35 years of experience in compliance consulting, advising and assisting financial institutions on consumer compliance and compliance management issues. He also develops and conducts compliance training programs for individual banks and their trade associations and has authored or co-authored numerous compliance publications and articles. Bill can be reached at (330) 678-0524 or wshowalter@younginc.com. CONTINUED FROM PAGE 15 NEBRASKA INDEPENDENT BANKER 16
RkJQdWJsaXNoZXIy MTU2Mjk4Mw==