Posted by Jenny_CA on 1/22/06 10:32pm
Msg #90194

to " De Man" :-) or anyone else that knows

If the borrowers have an adjustable rate note for the amount of $150,000.00 with a Pick-a-Payment loan and the note states that the rate is 6.59% but the payment is around $500 how am I supposed to know that the $500 payment is about 1.6% interest ?
That is aside from using a calculator. Is it listed somewhere in particular?

Also, is there a short, sweet way to explain the Pick-a-payment-loan?

Thank you.

Reply by PAW_Fl on 1/22/06 10:50pm
Msg #90195

Typically, with these types of loans, the interest on the loan is exactly as the note states, however, the payment options may be quite different, depending on how much principal, if any, is being paid along with the interest. I've done some loans that are "negatively amortized" so the payment doesn't even cover the months interest and thus the excess unpaid interest is added to the principal amount due. In these types of adjustable rate notes, the interest will adjust according to some period (1 month, 6 months, 12 months) and the payment will adjust on a different period (3 months, 6 months 12 months).

As for the description of the different payment options, depending on lender, there should be a comprehensive description (disclosure) in the package. There is really no "short" answer to any loan product option as they all have many variations and nuances that the borrower must understand.

This webpage -> http://mortgage-x.com/library/option_arm.asp <- may help you wade through the terminology and options.

Reply by Jenny_CA on 1/22/06 11:19pm
Msg #90196

Re:Thank you so much!!

I have two more signings like the one today and this link is just what I needed. I was stressed because at first the borrowers were wondering what happend to the 1.6 interest they were promised eventhough the payment was what they were expecting I couldn't point out the 1.6 anywhere.

Now I can relax knowing I can read the site tomorrow morning and get a better understanding of this loan before the signings. I really appreciate it, thanks again.

Reply by janCA on 1/23/06 11:14am
Msg #90273

Self-Explantory on monthly loan statements

There are usually four options: 1.) Minimum Amount Due which part of the interest is deferred. 2.) Full interest payment 3.) Full Principal and interest payment and 4.) A 15- year payment plan. I've only seen this on World Savings.

Reply by Jenny_CA on 1/23/06 2:26pm
Msg #90363

Re: Self-Explantory on monthly loan statements

These are World Savings. The borrower wanted to know where the 1.6 was listed. I did show her the 4 options.