real estate finance - full book (500 pgs)

The borrower might opt to convert if the interest

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Unformatted text preview: ate will be based on a specified index plus a margin and that the payment will be based on the interest rate, the loan balance, and the remaining loan term A statement that will alert consumers about a discount feature when the initial rate is discounted The frequency of rate and payment adjustments If the presence of rate or payment caps can result in negative amortization, a statement about those features The existence of a demand feature, if applicable A statement describing the type of information that will be contained in an adjustment notice When adjustment notices will be provided. • • • • • • Dynasty School (www.dynastySchool.com) 9-27 REAL ESTATE FINANCE Negative amortization features, if any. Maximum caps on (1) the amount interest increase and (2) the total for the loan. The lender may comply with Regulation Z by giving the potential borrower the Consumer Handbook on Adjustable Rate Mortgages (appendix B), published by the Federal Reserve and the Federal Home loan Bank Board. In addition, California lenders are required to have the borrower sign an adjustable rate loan rider to the promissory note. SUBSEQUENT DISCLOSURES Each adjustment to the interest rate in a variable–rate transaction, with or without a corresponding adjustment to the payment, is an event requiring new disclosures to the consumer. Timing – Disclosures are required at least once each year during which an interest rate adjustment is implemented without an accompanying payment change, and at least 25, but not more than 120, calendar days before a payment at a new level is due. Disclosure Contents – The following disclosures, as applicable, must he delivered or placed in the mail: • • • • The current and prior interest rates The applicable index values The contractual effects of the adjustment, including the payment due after the adjustment, and a statement of the loan balance The payment (if different from above) that would fully amortize the loan at the new interest rate over the remaining loan term. Adjustment P...
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