Separate ARM Disclosures Tiered Pricing?

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Question:

I am preparing new adjustable rate disclosures for 1,3 and 5 year ARMs for this year and our bank has implemented Tiered pricing based upon beacon scores. Do I need separate disclosures for the multiple tiers or can I state in the disclosure for a tier one product that the discount or premium and interest rate for the product may vary based upon beacon? Ask the lender for current index, discount and premium and current interest rate. I have gone all through the commentary for 19(b)(2) and I am interpreting it to say I need separate disclosures because the rules relating to changes in interest rate are different in the programs.

Answer:

A difference in the margin does not constitute a separate program if that is the only difference. Look to the OSC to 226.19(b)(2)(2)(ii).

All you need is, or something similar (look to the reg for model language). The margin represents one we have recently used. Ask the lender for current index, discount and premium and current interest rate.

However, if one product carries a premium, and the other carries a discount, then I would opine you need separate disclosures.

First published on BankersOnline.com 5/2/05