Can anyone tell me when the ARM Index is set?

I thought it was set at time of rate lock.

I am being told it is set at the time of the closing / closing disclosure.

Where would I find guidance on this?

Please advise.

Read the commentary to 1026.17(c) - Comments 8 -10 if I remember correctly.

Thank you - I read the commentary and I don't see when the index is set.

I thought the index used on a floating LE was set at time of rate lock.

The issue we are having is they are updating the index at time of CD and that can cause an APR issue (I believe).

If you are locking the rate and the rate that is locked equals the then current index plus margin (no discount or premium) then you use that rate for your APR calculations, regardless of whether or not the index has moved at the time of closing.

If you are locking a discount or premium rate, then your APR disclosures must be based on the locked rate and then the current index plus margin at the time the loan closes (allowing for any look back period that may exist in your note).

Example:

Interest rate = 4%
Index at the time the rate was locked was 1.43%, fully indexed rate = 4.125%
Index at the time the CD is prepared 1.70%, fully indexed rate = 4.5%

Which index do I use? The one at the time the rate was locked or the one at the time the CD is issued?

Lori

Since you locked a discounted rate, then you use the index in effect at consummation (or an index that was in effect during the defined look back period in the note prior to consummation) to calculate the interest rate for the loan after the end of the introductory period.