Posted by PJM/MI on 5/1/07 7:12pm
Msg #188329

Here's a new one on me

Note said rate adjusts on 7/2007 as did the amoritization schedule, yet rider, TIL stated change date of 7/2008. Nope..it didn't sign. And of course, the loan officer has gone home for the night.
I'm still scratching my head over this one.

Reply by jojo_MN on 5/1/07 8:43pm
Msg #188338

Does the amoritization show a negative amortizaton over the first year? Some brokers are selling a 1.5 - 4% loan.

The way they are doing this is to have them pay the low interest rate for the first year. (or 3-5 years). The first thirty days, they are charged the low rate; but, after the first month, the rate jumps to anywhere from 7-9 (example only). They are paying the 1.5-4% for the entire year, but are charged the full 7-9%. They actually will owe more for their loan after the first year than when they started.

Some are selling the rate for 3-5 years before the first change. One borrower actually owed $20,000 more in five years than when they first took out the loan.

Reply by PAW on 5/1/07 8:55pm
Msg #188343

Probably two paragraphs in the note: Interest Rate Changes, which occur monthly starting 7/2007 and Payment Amount Changes, which happens after one year. So, the interest rate climbs higher and higher each month, adding accrued interest, but the payment rate is staying at a low rate, which means the payment doesn't cover the accrued interest. Negative Amortization. The accrued interest that doesn't get paid is added to the principle. Thus the principle amount due after the first year is higher than the amount borrower (initial principle).