Introduction: I have written a few different posts at the Advertiseyourloans.com about coming up with a proper ARM disclosure that meets all of the rules of Regulation Z. Below is a new version that shows one way to comply with the rules:
Type of Advertisement: Mailer Advertisement with 5-1 ARM product
Applicable Regulations: Regulation Z
Sample ARM Loan Ad Disclosure:
The initial payment on a -year [$200,000] 5-year Adjustable Rate Loan is [2.99%] at [70%] loan-to-value (LTV) is [$842.14] with 2.25 points due at closing. The Annual Percentage Rate (APR) is [3.244%]. After the initial 5 years, your interest rate can change annually and is subject to an initial interest rate cap of 2.00%, and annual rate cap of 2.00% and a lifetime cap of 6.00%. Payment amount shown does not include taxes and insurance premiums. The actual payment amount will be greater. At the first adjustment, the interest rate cannot increase above [4.99%] or decrease below [2.25%] (the margin). If the interest rate reached the lifetime maximum cap of [8.99%], your payment would be $[max payment]. Actual payment amounts will vary annually after the fifth year based on changes in the LIBOR index.
Practice Tip: Note that you will need to confirm your company’s start rate, margin, initial change cap, subsequent change cap, life cap plus the floor (how low the rate can go on a rate change date] to confirm that you have provided an accurate disclosure that matches the loan program and the promissory note for your ARM loan the you are advertising.