Reg D - Alternate Mortgage Transaction Parity Flashcards
What is an alternate mortgage transaction?
A loan, credit sale or account:
- That is secured by a 1-4 family residential structure,
- Made primarily for consumer purpose, and
- In which the interest rate or finance charge may be adjusted or renegotiated.
For loans subject only to OCC ARM regulation and NOT subject to Regulation Z – that is, loans for business purpose, rental property or a personal vacation home – a bank may use any ___ it chooses.
index
A creditor that makes an alternative mortgage transaction that has a balloon payment may negotiate an increase or decrease in the interest rate at the time of renewal only if there was what?
A written commitment by the creditor to renew the transaction at specified intervals throughout the amortization period.
A creditor may ____ the rate on any alternative mortgage transaction at any time.
decrease
Under which circumstance would a creditor be allowed to refuse to renew an alternative mortgage parity transaction?
a. The borrower made a late payment twice during the first five years of the transaction.
b. The borrower refused to keep the house insured for hazards.
c. The information on the borrower’s past employment history was incorrect by one month.
d. The borrower has asked for interest rate relief.
a. The borrower made a late payment twice during the first five years of the transaction.
Of the following loans made by a national bank, which loan is NOT covered by the OCC ARM regulation?
a. A loan to purchase a single-family dwelling to be used as a residence, secured by the dwelling with an adjustable interest rate.
b. A loan made to purchase a mobile home to be used as rental property, secured by the home with a variable interest rate.
c. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest.
d. A loan made to purchase a duplex, secured by the dwelling, amortized over 15 years with a 5-year maturity, at a variable rate of interest.
c. A loan made to purchase an eight-unit apartment complex, secured by the building, made payable on demand with a variable rate of interest.
On which of the following adjustable-rate loans must the bank use an index beyond its control?
a. A loan to purchase a home to refurbish and resell for a profit
b. A loan to purchase a vacation home
c. A loan to purchase a duplex where the borrower will live in one of the units
d. A loan to purchase a home to be used as rental property
c. A loan to purchase a duplex where the borrower will live in one of the units
First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliate banks. All of its own ARMs and well as those it purchases are subject to Regulation Z. Which of the following practices is NOT acceptable under the OCC ARM regulation?
a. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National’s prime rate.
b. The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time.
c. The bank links the interest rate indices on its own ARM loans to the national prime rate as published in The Wall Street Journal.
d. The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.
a. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National’s prime rate.
For loans that are subject to both the OCC ARM and to Reg Z - that is, loans made to an individual for personal purposes, secured by the borrower’s principal dwelling, and have a term longer than 1 year, the index to which the interest rate is tied to must be… what? (4 things)
- Specified in the loan docs
- Readily available to and verifiable by the borrower
- Beyond the control of the bank
- A single value of a chosen measure or a moving average of the chosen measure calculated over a specified period.
