"Reg Z" form - Saab General Bulletin Board - Saabnet.com
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"Reg Z" form
Posted by Geoff (more from Geoff) on Tue, 28 Mar 2006 11:28:47
In Reply to: Oh good, thanks, NickR, Tue, 28 Mar 2006 10:10:47
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Your lenders were legally required to give you a "truth in lending disclosure" with each loan, and you had to sign a form acknowledging you received it and understood it. We bankers call that a "Reg Z form." It clearly discloses how much the rate can go up and when, either at each reset or over the life of the loan -- 2% and 6% are common for those numbers.
ARM rates are composed of an "index" plus a "margin." What goes up (or theoretically down, too) is the index. Comparing an example ARM index (the 2-year constant maturity treasury rate) from today and two years ago, for example, the difference is about 3.2% higher today (4.72% vs 1.53%). If your mortgage caps were 2% and 6%, your rate would go up 2% at this reset, even though the index was 3.2% higher. The rest of the 3.2% (assuming no further real rate increases) would hit you at the next reset.
Obviously, your actual loan terms will govern what happens, but a gut feel would be that your absolute best case would be a bump of a couple of percent on both loans. But that assumes similarity to the generic terms of a 2-yr ARM from the bank where I work. With your 100% LTV and the high-looking rates you quoted, (I did a 7-yr ARM with a 70% LTV about the same time you got yours, and I'm paying 4.75%) you *really* need to dig out that Reg Z from your closing package or call your bank's service center to see what is going to happen.
HTH
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