How to use the booklet When you and your mortgage lender discuss adlus - PDF document

1 How to use the booklet When you and your
How to use the booklet When you and your mortgage lender discuss adlustable-rate mortgages (ARMs). you receive a copy of this booklet. When you apply for an ARM loan. you receive a Loan Gstimate. You can resuest and receive multiple Loan Gstimates from competing lenders to �nd your best deal. You may want to have your Loan Gstimate handy for any loan you are considering as you work through this booklet. We reference a sample Loan Gstimate throughout the booklet to help you apply the information to your situation. You can �nd more information about ARMs at cfpb.gov/about-arms. You’ll also �nd other mortgage-related CFPB resources. facts. and tools to help you take control of the homebuying process.About the CFPB The Consumer Financial Protection Bureau regulates the offering and provision of consumer �nancial products and services under the federal consumer �nancial laws and educates and empowers consumers to make better informed �nancial decisions.This booklet. titled Consumer Handbook on Adlustable Rate Mortgages. was created to comply with federal law pursuant to 12 U.S.C. 2604 and 12 CFR 1026.19(b)(1).How can this booklet help you? This booklet can help you decide whether an adlustable-rate mortgage (ARM) is the right choice for you and to help you take control of the homebuying process.Your lender may have already provided youwith a copy of Your Home Loan Toolkit. Youcan also download the Toolkit from the CFPB’sBuying a House guide at cfpb.gov/buy-a-house/An ARM is

2 a mortgage with an interestrate that cha
a mortgage with an interestrate that changes. or “adlusts.”throughout the loan.With an ARM. the interest rate and monthly payment may start out low. However. both the rate and the payment can increase very suickly.Consider an ARM only if you can affordincreases in your monthly payment—evento the maximum amount. After you �nish this booklet:You’ll understand how an ARM works andwhether it’s the right choice for you. (page 2)You’ll know how to review importantdocuments when you apply for an ARM.(page 6)You’ll understand the risks that come withdifferent types of ARMs. (page 18) Is an ARM right for you? ARMs come with the risk of higher payments inthe future that you might not be able to predict.But in some situations. an ARM might make sensefor you. If you are considering an ARM. be sure tounderstand the tradeoffs.TIP Don’t count on being able to re�nance before your interest rate and monthly payments increase. You might not sualify for re�nancing if the value of your home goes down or if something unexpected damages your �nancial situation. like a lob loss or medical costs. COMPARE FIXED-RATE MORTGAGE ADJUSTABLE-RATE MORTGAGE Consider You prefer predictableYou are con�dent you can afford increasesthis option if payments. orYou plan to keep your homefor a long period of timein your monthly payment—even to themaximum amount. orYou plan to sell your home within a shortperiod of timeInterest rate Set when you take out the loanStays the same for the entireloan termB

3 ased on an index that changesMay start o
ased on an index that changesMay start out lower than a �xed rate mortgagebut you bear the risk of increases throughoutyour loanMonthly payment Principal and interest paymentstays the same over the life ofyour loanYou know the total you will payin principal and interest overthe life of the loanInitial principal and interest payment amountremains in effect for a limited periodYou can't know in advance how muchtotal interest you will pay because yourinterest rate changesIf you can’t afford the increased payments.you may lose your home to foreclosureeeADLUSTABLG-RATG MORTGAGGS IS AN Learn about how ARMs work As you decide whether to move ahead with an ARM. you should understand how they work andhow your housing costs can be affected.Interest rate = index + margin The interest rate on an ARM has two parts: the index and the margin.INDEX An index is a measure of interest rates generally that re�ects trends in the overall economy. Different lenders use different indexes for their ARM programs. Common indexes include the U.S. prime rate and the Constant Maturity reasury (CMT) rate. alk with your lender to �nd out more about the index they use. which is also shown on your Loan Gstimate. MARGIN The margin is an extra percentage that the lender adds to the index.You can shop around to different lenders to �nd the lowest combination of the index plus the margin. Your Loan Gstimate shows the index and Changes to initial rate and payment The initial interest rate and initial principal andinte

4 rest payment amount on an ARM remain in
rest payment amount on an ARM remain in effect for a limited period. So. when you see ARMs advertised as 511 or 516m ARMs: The �rst number tells you the length of timeyour initial interest rate lasts.The second number tells you how often therate changes after that.For example. during the �rst �ve years in a 516m ARM your rate stays the same. After that. the rate may adlust every six months (the 6m in the 516m example) until the loan is paid off. This period between rate changes is called the adjustment periodAdlustment periods can vary. Some last a month. a year. or like this example. six months. For some ARMs. the initial rate and payment can be very different from the rates and payments laterin the loan term. Gven if the market for interest rates is stable. your rates and payments could change a lot. Loan Costs Other Costs Total Closing Costs (J) Closing Costs Financed (Included in Loan Amount) Down Payment/Funds from Borrower Deposit Funds for Borrower Seller Credits Adjustments and Other Credits Estimated Cash to Close Calculating Cash to Close Closing Cost Details A. Origination Charges % of Loan Amount (Points) Services You Cannot Shop For C. Services You Can Shop For TOTAL LOAN COSTS A + B + C E. Taxes and Other Government Fees Recording Fees and Other Taxes Transfer Taxes Prepaids Homeowner’s Insurance Premium ( months) Mortgage Insurance Premium ( months) Prepaid Interest ($ per day for days @ ) Property Taxes ( months) G. Initial Escrow Payment at C

5 losing Homeowner’s Insurance $ per
losing Homeowner’s Insurance $ per month for mo. Mortgage Insurance $ per month for mo. Property Taxes $ per month for mo. H. Other I. TOTAL OTHER COSTSJ. TOTAL CLOSING COSTS Lender Credits Loan Estimate DATE ISSUED APPLICANTS PROPERTY SALE PRICE Save this Loan Estimate to compare with your Closing Disclosure. LOAN TERM 30 years Purchase PRODUCT 5/1 Adjustable Rate LOAN TYPE Conventional FHA LOAN ID # RATE LOCK YES Before closing, your interest rate, points, and lender credits can change unless you lock the interest rate. All other estimated closing costs expire on Can this amount increase after closing? Loan Terms Projected Payments Loan AmountInterest RateYES · Adjusts every year starting in year 6 · Can go in year 8 · See AIR Table on page 2Monthly Principal & Interest See Projected Payments Below for Your Total Monthly PaymentYES · Adjusts every year starting in year 6 · Can go in year 8 Does the loan have these features? Prepayment Penalty Balloon Payment Costs at Closing Payment Calculation Years 1-5 Years 6 Years 7 Years 8-30 Principal & Interest $910.66 $838 min $1,123 max $838 min $1,350 max $838 min $1,467 max Mortgage Insurance Estimated Escrow Amount can increase over time Estimated Total Monthly Payment $1,290 $1,217 – $1,502 $1,217 – $1,729 $1,179 – $1,808 Estimated Taxes, Insurance & Assessments Amount can increase over timea month This estimate includes Property Taxes Homeowner’s Insurance Other: In escrow? YES YES See Section G on page 2 for esc

6 rowed property costs. You must pay for o
rowed property costs. You must pay for other property costs separately. Estimated Closing CostsIncludes in Loan Costs + in Other Costs – $X,XXX in Lender Credits. See details on page 2. Includes Closing Costs. See calculating Cash to Close on page 2 Estimated Cash to Close $XX,XXX for details. Visit www.consumernance.gov/learnmore for general information and tools. LOAN ESTIMATE PAGE 1 OF 3 • LOAN ID # 123456789 Adjustable Interest Rate (AIR) Table LOAN ESTIMATE Index + Margin 1 Year Cmt + 2.25% Initial Interest Rate Minimum/Maximum Interest Rate Change Frequency First Change Beginning of 61st month Subsequent Changes Every 12 months after first change Limits on Interest Rate Changes First Change Subsequent Changes PAGE 2 OF 3 • LOAN ID # 123456789 Use your Loan Estimate to understand your ARM When you apply for a mortgage, the lender gives you a document called a Loan Estimate. It describes important features of the loan the lender is offering you. This section illustrates the parts of a Loan Estimate that are speci�c features of ARM loans.An interactive, online version of a Loan Estimate sample is available cfpb.gov/arm-explainer/ n Terms Projected Payments Product Adjustable nterest Rate (AIR) Table Loan terms INTEREST RATE The Loan Gstimate shows the initial interest rateyou pay at the beginning of your loan term. This row also shows how often your rate can change and how high it can go. MONTHLY PRINCIPAL & INTEREST The Loan Gstimate shows the ini

7 tial monthlyprincipal and interest payme
tial monthlyprincipal and interest payment you’ll make if you accept this loan. Your principal is the money that you originally agreed to pay back on your loan. Interest is a cost you pay to borrow the principal. The initial principal and interest payment amount for an ARM is set only for the initial period and may change after that. THE TALK You might hear. “An ARM makes sensebecause you can re�nance the loanbefore your interest rate and monthlypayment increase.”Ask yourself. a spouse. or a loved one:“What if the market value of the home goes down?” “What if our �nancial situation orour credit score gets damaged by something unexpected like a job loss or illness?” “If we can’t re�nance at a better rate.can we afford the maximum interest rate and payment increase under this loan?” Loan Terms Can this amount increase after closing? Loan Amount Interest Rate YES every year starting in year 6Can go in year 8AIR TableMonthly Principal & Interest See Projected Payments Below for Your Total Monthly Payment YES every year starting in year 6Can go in year 8Does the loan have these features? Prepayment Penalty Balloon Payment Example of “Loan terms” section. Find this on page 1 of Projected Payments Payment Calculation Years 1-5 Years 6 Years 7 Years 8-30 Principal & Interest $910.66 $838 min $1,123 max $838 min $1,350 max $838 min $1,467 max Mortgage Insurance Estimated Escrow Amount can increase over time Estimated Total Monthly Payment $1,290

8 $1,217 – $1,502 $1,217 – $1,72
$1,217 – $1,502 $1,217 – $1,729 $1,179 – $1,808 Estimated Taxes, Insurance & Assessments Amount can increase over time a month This estimate includes Property Taxes Homeowner’s Insurance Other: In escrow? YES YES See Section G on page 2 for escrowed property costs. You must pay for other property costs separately. ExampleProjectedayments”ction.ispage 1 of your own Loan Estimate Projected ayments PRINCIPALTEREST The monthly principal and interest payment on your ARM is likely to change after the initial period.Review this section to see how your payment canchange based on your loan’s interest rate.ESTIMATEDOTALAYMENT Review this row to see the total minimum andmaximum monthly payments. The paymentsinclude mortgage insurance. property taxes.homeowners insurance. and any additionalproperty assessments or other escrow items.Learn more about these mortgage terms atcfpb.gov/mortgage-terms/ Keep in mind that other parts of your monthly and annual housing costs can change. such as your property taxes and homeowners THE TALK Talk over how your �nancial life could be affected if your ARM monthlypayment increases. In future years. youmight face money decisions like:ob changes School or other education expenses Medical needs and expenses Because ARM adlustments are unpredictable. you might have less or more �nancial �exibility for other parts of your life. Adjustable Interest Rate (AIR) Table Index + Margin 1 Year Cmt + 2.5% Initial Interest Rate Minimum/Maximum Interest Rate Change Freq

9 uency First Change Beginning of 61st m
uency First Change Beginning of 61st month Limits on Interest Rate Changes Subsequent Changes Every 12 months after rst change First Change Subsequent Changes Adjustable Interest Rate (AIR) table You should read and understand the AIR table calculations before committing to an ARM. It's important to know how your interest rate changes over the life of your loan.INDEX + MARGIN Your lender is resuired to show you how yourinterest rate is calculated. which is determined bythe index and margin on your loan. See page 2 ofthis booklet for more about index and margin.INITIAL INTEREST RATE This is the interest rate at the beginning of your loan. The initial interest rate changes to the index plus the margin at your �rst adlustment (sublect to the limits on interest rate changes). Your loan servicer tells you your new payment amount seven to eight months in advance. so you can budget for it or shop for a new loan.MINIMUM/MAXIMUM INTEREST RATE This shows how low or high your interest rate couldbe over the life of your loan. Generally. an ARM’s interest rate is never lower than the margin.TEASER RATES Some lenders offer a “teaser.” “start.” or “discounted” rate that is lower than their fully indexed rate. When the teaser rate ends. your loan takes on the fully indexed rate. Don’t assume that a loan with a teaser rate is a good one for you. Not everyone’s budget can accommodate a higher payment.CHANGE FREQUENCY This indicates when the interest rate on your loan will change. Your loan servicer

10 sends you advance notices of changes.
sends you advance notices of changes. LIMITS ON INTEREST RATE CHANGES This shows the highest amount your interest rate can increase when there is a change.xample of “AIR table” section. Find this on page 2 of yourown Loan Estimate Consider this example:A lender’s fully indexed rate is 4.5% (the index is 2% and the margin is 2.5%). The loan also features a “teaser” rate of 3%. ven if the index doesn’t change.your interest rate still increases from 3% to 4.5% when your teaser rate expires. OMPARE YOUR ARM OFFERS Shop for at least three loan offers. and �ll in the blanksbelow using the information on your Loan Gstimates:ARM OFFER 1 ARM OFFER 2 FIXED-RATE OFFER    Lender name Loan amount Initial interest rateInitial principal and interest payment Index Margin How long will the initial interest rate and initial payment apply? How high can my interest rate go?How high can my principal and interest payment go?  THE TALKYou are in control of whether or not to proceed with an ARM. If you prefer to proceed with a �xed-rate mortgage. here is one way to start the conversation with a lender: My best loan offer is: — A �xed-rate mortgage seems to be a better �t for me. Let’s talk about what you can offer and how it compares to other loans I may be able to get.” �� Review your lender’s ARM rogram disclosure Your lender gives you an ARM program disclosure when they give you an application. This is the lender

11 ’s opportunity to tell you about th
’s opportunity to tell you about their different ARM loans and how the loans work. The index and margin can differ from one lender to another, so it is helpful to compare offers from different lenders. Generally, the index your lender uses won’t change after you get your loan, but your loan contract may allow the lender to switch to a different index in some situations.  GATHER FACTS Review your program disclosure and ask your lender questions to understand their ARM loan offerings: How are the interest rate and payment determined? Does this loan have interest-rate (that apis, limits on interest rate changes)? How often do the interest rate and payment adjust? What index is used and where is it published? Is the initial interest rate lower than the fully indexed rate? (see “Teaser rates,” on page 12) What type of information is provided in notices of adjustment and when do I receive them? Ask about other options offered by your lender Conversion option Your loan agreement may include a clause that lets you convert the ARM to a �xed-rate mortgage in the future. When you convert, the new rate is generally set using a formula given in your loan documents. That �xed rate may be higher or lower than interest rates available to you in the market at that time. Also your lender may charge you a conversion fee. Ask your lender whether the loan you are being offered has a conversion feature and how it works. Special features You can shop around to understand what special ARM features may be a

12 vailable from different lenders. Not all
vailable from different lenders. Not all programs are the same. Talk with your lender to �nd out if there’s anything special abouttheir ARM programs that you may �nd valuable...ADJUSTABLE-RATE MORTGAGES REVIEW YOUR LENDER’S ARM PROGRAM DISCLOSURE Check your ARM for features that could pose risks Some types of ARMs have features that can reduce your payments in the short term but may include fees or the risk of higher payments later. Review your loan terms and make sure that you understand the fees and how your rate and payment may change. Lower payments at theeginning ouldean ighereesuch higher aymentsater. Payingints educeouritial interestate Lenders can offer you a lower rate in exchange for paying loan fees at closing, or pointsWith an ARM, paying points often reduces your interest rate only until the end of the initial period—the reduction most likely does not apply over the life of your loan. If you are using an ARM to re�nance a loan. points are often rolled into your new loan amount. You might not realize you are paying points unless you look carefully. Points are disclosed on the top of Page 2 of your Loan Estimate. Lenders may give you the option to pay points, but you never have to take that option. o �gure out if you have a good deal, compare your cost in points with the amount that you will save with Loan Costs A. Origination Charges 1% of Loan Amount (Points) Application Fee Processing Fee xample of “Loan costs” section. Find this on page 2

13 ofyour own Loan Estimate THE TALK If yo
ofyour own Loan Estimate THE TALK If your Loan Estimate shows points, ask your lender: “What is my interest rate if I choose not to pay points?” “How much money do I pay in points? And, compared to the total reduction in my payments during the initial period, am I coming out ahead?” “Can I see a revised Loan Estimate with the points removed and the interest rate adjusted?” CHECK YOUR ARM FOR ADDITIONAL FEATURES Interest-only ARMs With an interest-only ARM payment plan. you payonly the interest for a speci�ed number of years.During this interest-only period. you have smallermonthly payments. but you are not payinganything toward your mortgage loan balance.When the interest-only period ends. yourmonthly payment increases—even if interestrates stay the same—because you must startpaying back the principal plus the interest eachmonth. Your monthly payments can increasea lot. The longer the interest-only period. themore your monthly payments increase after theinterest-only period ends.Payment option ARMs Payment option ARMs were common before 2008 when the housing crisis began. and some lenders might still offer them. A payment option ARM means the borrower can choose from different payment options. such as: A traditional principal and interest paymentAn interest-only payment (see above)A minimum payment. which could result innegativeamortizationNegative amortization happens when you are not paying enough to cover all of the interest due. Your loan balance goes up instead of down.  GA

14 THER FACTS Learn more information about
THER FACTS Learn more information about payment option ARMs and negative amortization at:cfpb.gov/payment-option-arm/ cfpb.gov/negative-amortization/  WELL DONE! Choosing the right home loan is lustas important as choosing the righthome. By esuipping yourself withknowledge about ARMs. you candecide whether or not this type ofloan is the right choice for you. �� &#x/MCI; 0 ;&#x/MCI; 0 ;Consumer Handbook on Adjustable-Rate Mortgages  ASK YOUR LENDER How high can my payment goAHow high can my interest rate goAHow long is my initial principal andinterest payment guaranteedA  ASK YOURSELF Have I shopped around to compare ARMsand �xed-rate loansAIf an ARM has a lower initial interest ratethan a �xed-rate mortgage. is paying lessmoney now worth the risk of an increaselaterACan I afford the highest payment possiblewith the ARM if I can’t sell the home. orre�nance into a lower rate. before theincreaseA  ONLINE TOOLS CFPB website cfpb.govAnswers to common questions cfpb.gov1askcfpbTools and resources for home buyers cfpb.gov1owning-a-homeTalk to a housing counselor cfpb.gov1�nd-a-housing-counselorSubmit a complaint cfpb.gov1complaintLast updated 06120 Your Lender’s ARM Disclosure & Description of Programs This disclosure describes the features of the adjustable-rate mortgage (ARM) programs your lender offers. Depending on the existing market conditions, your lender may not offer all of the programs described in this booklet at any given time. This di

15 sclosure is not a commitment by the lend
sclosure is not a commitment by the lender to make you a loan on any of the terms described in this disclosure. It is intended solely to provide you with a general description of your lender’s loan programs. If you eventually obtain a loan from the lender, the loan note, security instrument and related documents (“Loan Documents”) will establish your legal rights and obligations. Information on any other ARM programs we may have is available on request. ARM Program HowYour InteresRatandPaymentsare Determined Yournterestate willbasedn an indexlus margin.uraymentille basedn thinterestate,oan balance, anoaerm. Thinitialnterestate mayiscountate orremiumate andnotasedn thindexsedmake later adjustments. premiumnterest rateneat igreaterannterest ratealculated byddingndexnd the margin. A discount interesratenehat isesshanhenterest ratelculated byddingndexnd thmargin.r thmounf anurrennteresiscountr premiumsfter the initiaeriodour intereste wilqual current indexplutheargirounded tonearest 1/8percentageoint (0.125%),nlessustment Car the LifetimCaimithe amounf change ithe interesour currennteresargin. Theexepenhicprograelectffer ARrogramithe followinindexes: UnitedStatesTreasurSecurities Thindex is,ependingtheroduct,heeeklyverageield onnited Statesreasuryecuritiesdjusted toconstant maturityneear.nformationbout thisndexpublishebyederaleservBoard ipublication(519)Currenthistorical.15 data areailabletheederReservBoard's webtewww.federalreserve.gov/). nformationndividualpiesubscriptions,ntact Publicationservicest theederaReserveoard (phon

16 e 2024523244,ax 202728886). Fopaielectro
e 2024523244,ax 202728886). Fopaielectronic accessrrent and historicalta,TATSA at 1782887202-1986. bankThe index is .S.IBOR index by the end of 2020. We have been working with f your ARM. such as how much your interest rate can Secured Overnight Financing Rate (SOFR)The index is the overnight rate for U.S. dollar-denominated loans.backed by their bond assets. If for any reason the index is not available. �� ARM Program (continued) ate can change every six or based on Program First Change Date from the 1st payment date Subsequent Change Date after the 1st change date At the First Change Date, your interest rate cannot increase or decrease more than the First Adjustment Cap. No interest rate change after the First Change Date will be more than the Subsequent Adjustment Cap. Your First Adjustment Cap will be set at an amount between 1 and 6 percentage points or another specific numeric cap identified in your loan documents, depending on the ARM program. Your Subsequent Adjustment Cap will be set at an amount between 1 and 2 percentage points for each adjustment, depending on the ARM program. There is no limitation on the total amount by which your interest rate can decrease over the life of your loan; depending on the loan program, your interest rate can never be lower than the margin regardless of how low the index may drop over the term of the loan. (For FHA and VA ARM loans, the First Adjustment Cap, Subsequent Adjustment Cap, and Lifetime Cap apply to both increases and decreases.) Regardless of the current value of the

17 index plus margin, your interest rate c
index plus margin, your interest rate can never exceed the Lifetime Cap which will be established when you “lockin” or price protect with your lender the initial interest rate and discount points applicable to your loan. Your Lifetime Cap will be set at 5 or 6 percentage points above your initial rate, depending on the ARM program. Ask for our current First and Subsequent Adjustment Caps and Lifetime Cap information. How YourMonthly PaymentCanChange Your monthly payment can increase or decrease substantially based on the annual changes in the interest rate. The amount of your new payments will be due starting on the first monthly payment date after the Change Date until the amount of your monthly payment changes again. The following examples demonstrate how your monthly payment can change. �� 1.750_______ 2.1850 (p)_____________ 4.125 ________ _______________________________________________________________________________________________ARM Program (continued) A.ARM Programs withIndexesBased onU.S.TreasurySecuritiesOn a $10,000 loan with the terms and the initial interest rates shown below (minus a discount or plus a premium recently used for the program, which discount or premium is set forth below), the maximum amount that the interest rate can rise under the program is shown below. The monthly payment can increase from the initial payment shown below to the maximum payment shown in the year indicated. Amortization (years) Index Value (%) (1) Initial Rate (%) (4) Max Rate (%) (6) Year of Max P

18 ayment Discount (d) Premium (p) (3) Mar
ayment Discount (d) Premium (p) (3) Margin(%) (2) Initial P&I Payment Adjustment Caps (%) (5) Max P&I Payment(7) Program FHA / VA 1 30 mount of aiscount (d) or (pounded to thePayment Schedule for Government ARMs, assuming maximum rate increases on a $10,000 loan. (Initial and maximum interest rates are shown in the preceding table.) Program Initial Payment 1st Increase 2nd Increase 3rd Increase 4th Increase 5th Increase For FHA & �� &#x/MCI; 0 ;&#x/MCI; 0 ;I. ARM Program (continued) You wibeotifiedritingdays,utmorehan20efortheueatepaymentt a new leveThisoticwill containnformationboutindexnterestesaymenmountoabalance. ivide60,000/$10,0006 X $46= withLondonlus a premium Program Amortization (years) Index Value (%)(1) Margin(%) (2) Discount (d) Premium (p) (3) Initial Rate (%) (4) Initial P&I Payment Adjustment Caps (%) (5) Max Rate (%)(6) Max P&I Payment Year of Max Payment NonConforming Loans Max Program Amortiz(years) Value (%)(1) (%) (2) (3) ation Index Margin Discount (d) Premium (p) Initial Rate (%) (4) Initial P&I Payment Adjustment Caps (%) (5) (6) Max P&I Payment Year of ax Payment Rate (%) argin lessap/SubsequentYouilbetified inritingt least 60ys,ut nomorean20ys,eforthepayment at aew leveThisoticwill containnformationboutndex,nterestates,aymentmount,ndbalance. ivide10,000; then60,000/$10,00.) I. ARM Program (continued) On a $10.000 loan with the terms and the initial interest rates shown below (minus a discount or plus a premium recently used for the program. which discount or premi

19 um is set forth below). the maximum amou
um is set forth below). the maximum amount that the interest rate can rise under the program is shown below. The monthly payment can increase from the initial payment shown below to the maximum payment shown in the year indicated. Program Amortization (years) Index Value (%)(1) Margin(%) (2) Discount (d) Premium (p) (3) Initial Rate (%) (4) Initial P&I Payment Adjustment Caps (%) (5) Max Rate (%)(6) Max P&I Payment Year of Max Payment NonConforming Loans Max Program Amortiz(years) Value (%)(1) (%) (2) (3) ation Index Margin Discount (d) Premium (p) Initial Rate (%) (4) Initial P&I Payment Adjustment Caps (%) (5) (6) Max P&I Payment Year of ax Payment Rate (%) 50 0.Secured Overnight Financing 30-Day AverageFederal Reserve Bank of New Yorkargin lessYouilbeified inritingt least 60ys,ut nomorean20ys,eforthepayment at aew leveThisoticwill containnformationboutndex,nterestates,aymentmount,ndbalance. 10,000; then60,00060,000/$10,00 II. Additional Information Concerning Program Features (continued) A.BuydownOptionAseparateeaturerogramsmayferonnectionithRMn,uydowoptionIfchooseakevantageheuydownption,r a thirparty,ch as a selleruildermay agree“buydown” youroanayments for periodars.himeans thatmeonpays a lumplosinwhichreeply as subsidy”owardsfull monthpaymentderotepecifieperiodime.hiseryourctual ockemonthlpayment duringperiod otime. buydownimplanlternativeepayment method forfirst years f your loan. Programxample,ingheIBbaseindex,ouldorkhi

20 say: Payment Number Interest Rate Effect
say: Payment Number Interest Rate Effective Rate with Monthly Subsidy Amount Borrower Payment (P&I t less Subsidy) Monthly Subsidy Amount P&I Payment $0.00 subtracted as the monthly payments in year two would have ted. At the end of the buydown period, you The following example shows how your monthly payment can change if you have a buydown. For example. a 2-1 buydown over two years. on a $10.000. 30-year conforming 716m ARM. using the rate shown for the conforming 716m SOFR ARM Program Gxample. using the SOFR based index. would work this way:Payment Number Interest Rate Effective Rate with Monthly Subsidy Amount Borrower Payment (P&I t less Subsidy) Monthly Subsidy Amount P&I Payment $0.00 subtracted as the monthly payments in year two would have ted. At the end of the buydown period, you �� &#x/MCI; 0 ;&#x/MCI; 0 ;II. Additional Information Concerning Program Features (continued) B.Interest-OnlyHowYourMonthlyPayment Can Change Your monthly payment can increase or decrease substantially based on the annual changes in the interest rate. No yments of principal are due during the “Interest-Only Period.” For example, on a $10,000 loan with the terms and the initial interest rates shown below (minus a discount or plus a premium recently used for the program, which discount or premium is set forth below), the maximum amount that the interest rate can rise under the program is shown below. The monthly payments can increase from the initial payment shown below to the maximum payment show

21 n in the year indicated. NonConformingLo
n in the year indicated. NonConformingLoans InterestOnly Period (years) - Adjustment Caps Amortization (years) Index Value Discount (d) Premium (p) Initial Rate Max Rate Year of Max Payment Margin Initial Max P&I Program LIBOR 101 10 30 () 2.250 0. (d) $ 2/2/5 $ 13 71 10 30 () 2.250 0. () $ 2/2/5 $ 11 51 10 30 () 2.250 0. () $ 2/2/5 $ 11 R 10 10 30 () 0. () $ 2//5 $ 1 10 30 () 0. () $ 2//5 $ 11 5 10 30 () 0. () $ 2//5 $ 11 London Interbank Offered Rates -one year, //, Wall Street Journal Money Rates This is a margin we have used recently for this program; your margin may be different. This is the amount of discount (d) or a premium (p) used recently for this program; your initial rate may be discounted or priced at a premium by a different amount. Index Value plus Margin less Discount or plus Premium, rounded to the nearest one eighth of one percent. During Interest-Only period: monthly payments of Interest-Only. First Adjustment Cap/Subsequent Adjustment Cap/Lifetime Cap. Initial Rate plus Lifetime Cap, or simply Lifetime Cap, if applicable. Includes Principal & Interest. II. Additional Information Concerning Program Features (continued) level. This notice will contain information about your index. interest rates.by $10.000.60.0001$10.000 =31.25 =$187.50.)ortgage amount of $60.000 with a0-year term would be: $60.0001$10.000 =$187.50.)dditionalrmationhowever, 4 4 4 4 4 4 CONSUMER HANDBOOK ON Adjustable-Rate Mortgages ind out how your payment can An of�cial publication of