Posted by Mindy_WA on 11/20/07 1:57pm
Msg #222172
Question for you seasoned Brokers out there...
On the TIL of a loan with an adjustable rate when they show the first adjustable payment, is that a worst case scenario, or a best case scenario? I realize it depends on the prime rate, but seems to me that should be a worst case disclosure. I've never taken the time to figure this out, and now that have so much time on my hands, I don't have any adjustable rate loans to look at.
Just curious.
|
Reply by DianeCipa on 11/20/07 2:07pm
Msg #222174
Unless things have significantly changed since I did ARM TILS, the entire disclosure is based upon the current index value. The payments will show REAL payments for the first period, then adjust upwards following all caps until they hit the fully indexed note rate then they stay there throughout the balance of the term. [This isn't reality but it's a specific view of the product so if all lenders follow these rules ARMs should be easily compared by borrowers.]
The idea is that since you can't predict what will happen to the index, you assume it stays unchanged. This way the borrower gets a realistic view of the product if rates do nothing.
It's a good tool in the hands of someone who can explain it. It gives a very good understanding of the meaning of discounted start rates.
|
