Finance
An Oregon ARM (Adjustable Rate Mortgage) disclosure must include which of the following under federal TILA requirements?
AA guarantee that the rate will not rise above the initial rate
BHistorical interest rate information, worst-case payment scenario, and caps on rate adjustments✓ Correct
CThe name of the secondary market investor who will purchase the loan
DA requirement that the borrower refinance after 5 years
Explanation
Federal TILA (Regulation Z) requires ARM disclosures to include: the ARM loan program brochure, historical interest rate information (index history), an example of worst-case payment scenarios, initial interest rate, index used, margin, caps (periodic and lifetime), and how adjustments are calculated. Borrowers must receive this information early enough to compare loan products and understand their risk exposure.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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