Modifying an ARM

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Question:

When modifing an ARM note, to lower the interest rate or lower the margin, what all should be done? Also, does the modification need to be recorded since an ARM deed of trust has rate and margin info on it? Do we also need a ARM Ryder. Do we need a new ARM Disclosure?

Answer:

What needs to be recorded is a state law question. Check with your state for those requirements.

Otherwise, you are modifying a transaction -- hopefully to the benefit of the borrower. This does not trigger new disclosures under either TILA or Regulation Z if the conversion is to a fixed rate note. If the converted loan continues to be an ARM, you must continue providing regular ARM rate and payment disclosures.

First published on BankersOnline.com 4/03/06