Mortgage Loan Originators

banks and lenders must alert borrowers to the risk of payment increases before they

Posted on Thursday, December 23, 2010

Rates are still decent, and ARM loans don't immediately jump to mind in this kind
> of environment for loan agents when a borrower saunters through the door. (In fact,
> ARM loans have accounted for about 5% of production in recent months.) The Federal
> Reserve, however, approved an interim rule that will require mortgage lenders to
> disclose examples of how a mortgage loan's interest rate and monthly payment may
> change. The Fed has given us plenty of lead time: beginning on October 1, 2011,
> banks and lenders must alert borrowers to the risk of payment increases before they
> agree to take out mortgage loans with variable rates or terms, otherwise known as
> adjustable-rate mortgages. "They will be required to include a payment summary in
> the form of a table, including the initial rate, maximum rate that can occur in
> the first five years, and the "worst case" rate possible over the life of the loan,
> along with corresponding monthly mortgage payments." The rule also clarifies which
> mortgage types are covered by the special disclosure requirements, including loans
> with minimum payment options that cause the loan balance to increase, such as teaser
> rates and negative amortization loans.
rcrisman.com


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