I am having trouble figuring out if we need separate early disclosures for ARMs with a discounted initial rate. Currently all of our ARMS are premium priced but in the case that we do offer a discount in the future I want to make sure we are in compliance. Our current disclosures have verbiage on them that upon my research seems to be the “industry standard” but I am still unsure if we are meeting the regulatory requirements. Here is the statement that is included on our ARM notices:
Initial Interest Rate Premium or Discount: The initial interest rate being offered is not based on the interest rate formula described above. It may be “premium” priced, which means the rate being offered is higher than the interest rate you would calculate today by the interest rate formula. Loans also may be “discount” priced, which means the initial rate is lower than the rate calculated by the interest rate formula. Ask your mortgage representative for the amount of the discount or premium on your loan.