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Adjustable Rate Mortgage Brochure

Adjustable Rate Mortgage Brochure

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Federal Reserve Board - Consumer Handbook On Adjustable Rate Mortgages (04/11)
Federal Reserve Board - Consumer Handbook On Adjustable Rate Mortgages (04/11)

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Published by: David Schmid, REALTOR, CCIM, CPM, CRS on Jul 30, 2011
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07/30/2011

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The Federal Reserve Board
Board of Governors of the Federal Reserve Systemwww.federalreserve.gov0411
Consumer Handbook on
 Adjustable-RateMortgages
 
Consumer Handbook on Adjustable-Rate Mortgages
 
|
 
i
Table of contents
Mortgage shopping worksheet
...................................................... 2
What is an ARM?
.................................................................................... 4
How ARMs work: the basic features
.......................................... 6
 
Initial rate and payment ...................................................................... 6
 
The adjustment period ........................................................................ 6
 
The index ............................................................................................... 7The margin ............................................................................................ 8
 
Interest-rate caps .................................................................................. 10
 
Payment caps ........................................................................................ 13
Types of ARMs
........................................................................................ 15
 
Hybrid ARMs ....................................................................................... 15
 
Interest-only ARMs .............................................................................. 15
 
Payment-option ARMs ........................................................................ 16
Consumer cautions
.............................................................................. 19
 
Discounted interest rates ..................................................................... 19
 
Payment shock ...................................................................................... 20
 
Negative amortization—when you owe moremoney than you borrowed ................................................................. 22
 
Prepayment penalties and conversion .............................................. 24
 
Graduated-payment or stepped-rate loans ...................................... 25
Where to get information
.................................................................. 27
 
Disclosures from lenders .................................................................... 27
 
Newspapers and the Internet ............................................................. 28
 
Advertisements .................................................................................... 28
Glossary
..................................................................................................... A1
Where to go for help
............................................................................ A6
More resources and ordering information
............................... A8
 
ii
 
|
 
Consumer Handbook on Adjustable-Rate Mortgages
 
This information was prepared by the Board of Governors of theFederal Reserve System and the O
ce of Thri
f
Supervision inconsultation with the following organizations:AARPAmerican Association of Residential Mortgage RegulatorsAmerica’s Community BankersCenter for Responsible LendingConference of State Bank SupervisorsConsumer Federation of AmericaConsumer Mortgage CoalitionConsumers UnionCredit Union National AssociationFederal Deposit Insurance CorporationFederal Reserve Board’s Consumer Advisory CouncilFederal Trade CommissionFinancial Services RoundtableIndependent Community Bankers AssociationMortgage Bankers AssociationMortgage Insurance Companies of AmericaNational Association of Federal Credit UnionsNational Association of Home BuildersNational Association of Mortgage BrokersNational Association of RealtorsNational Community Reinvestment CoalitionNational Consumer Law CenterNational Credit Union Administration

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