Doing our first secondary market ARM. The loan has a fixed rate for the first 10 years, the start rate is greater than the index + margin, and the floor is the margin.

Should the am schedule reflect 120 payments of X (fixed rate) and 240 payments of Y (index + margin)? LOS is giving us something different than this.

That sounds correct me - what is the LOS showing?

Only case where it might be different is if the bank has small caps for the first change period. If the rate is (for example) 4.5%, margin of 2.5% but annual change caps of 1%, it will go from 4.5% to 3.5% at the first change to 2.5% thereafter.

No caps to limit rate change. Start Rate is 3.375%, Index is .288, Margin is 3, but LOS is using 3.5% as the rate for the term remaining after fixed rate ends. Remaining term should be 3.288% shouldn't it?

Is it set to round up to the nearest .125%?