Question

What must a lender provide to a prospective borrower who is obtaining an Adjustable Rate Mortgage?

            a. An educational brochure about ARMs

b. An historical example how payments on a $10,000 loan would have changed in response to actual past historical data on the index to be applied.

c. The payment amount on a $10,000 loan at the initial interest rate, and the maximum possible interest rate that could apply to the loan during its term.

d. All of the above.

Answer 1

Ans: Option (A) An educational Brochure about ARMs

Since Ferdral Reserve Board has published extensively informative "Consumer Handbook on Adjustible Rate Mortgages", any lender would want the borrower opting for ARM to be well versed with that handbook. The handbook contains all the information required for the borrowers. It tell about how ARMs work: the basic features, types of ARMs, the consumer cautions, where to get information from, where to go for help. Having that brochure reduces the need for the lender to tell each consumer/borrower seperately about how ARMs works, its history etc.