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6-6014

H-14—Variable-Rate Mortgage Sample

This disclosure describes the features of the adjustable-rate mortgage (ARM) program you are considering. Information on other ARM programs is available upon request.
How Your Interest Rate and Payment Are Determined
  • Your interest rate will be based on an index rate plus a margin.
  • Your payment will be based on the interest rate, loan balance, and loan term.
    • The interest rate will be based on the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year (your index), plus our margin. Ask us for our current interest rate and margin.
    • Information about the index rate is published weekly in the Wall Street Journal.
  • Your interest rate will equal the index rate plus our margin unless your interest rate “caps” limit the amount of change in the interest rate.
How Your Interest Rate Can Change
  • Your interest rate can change yearly.
  • Your interest rate cannot increase or decrease more than 2 percentage points per year.
  • Your interest rate cannot increase or decrease more than 5 percentage points over the term of the loan.
How Your Monthly Payment Can Change
  • Your monthly payment can increase or decrease substantially based on annual changes in the interest rate.
  • [For example, on a $10,000, 30-year loan with an initial interest rate of 12.41 percent in effect in July 1996, the maximum amount that the interest rate can rise under this program is 5 percentage points, to 17.41 percent, and the monthly payment can rise from a first-year payment of $106.03 to a maximum of $145.34 in the fourth year. To see what your payment is, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, the monthly payment for a mortgage amount of $60,000 would be $60,000 ÷ $10,000 = 6; 6 × 106.03 = $636.18 per month.)
  • [You will be notified at least 210, but no more than 240, days before first payment at the adjusted level is due after the initial interest rate adjustment of the loan. This notice will contain information about the adjustment, including the interest rate, payment amount, and loan balance.]
  • [You will be notified at least 60, but no more than 120, days before first payment at the adjusted level is due after any interest rate adjustment resulting in a corresponding payment change. This notice will contain information about the adjustment, including the interest rate, payment amount, and loan balance.]
[Example
The example below shows how your payments would have changed under this ARM program based on actual changes in the index from 1982 to 1996. This does not necessarily indicate how your index will change in the future. The example is based on the following assumptions.
Example
Amount

$10,000 Caps 

2 percentage points annual
Term

30 years interest rate
Payment adjustment

1 year   

5 percentage points lifetime
Interest adjustment

1 year interest rate
Margin

3 percentage points Index

Weekly average yield on U.S.
Treasury securities adjusted to
a constant maturity of one year
Payments would have changed under this ARM program based on actual changes in the index from 1982 to 1996
Year Index Margin* Interest Rate Monthly Payment Remaining Balance
(as of 1st week ending in July) (%) (percentage points) (%) ($) ($)
1982 14.41 3 17.41    145.90 9,989.37
1983  9.78 3 15.41** 129.81 9,969.66
1984 12.17 3 15.17    127.91 9,945.51
1985  7.66 3 13.17** 112.43 9,903.70
1986  6.36 3 12.41*** 106.73 9,848.94
1987  6.71 3 12.41*** 106.73 9,786.98
1988  7.52 3 12.41*** 106.73 9,716.88
1989  7.97 3 12.41*** 106.73 9,637.56
1990  8.06 3 12.41*** 106.73 9,547.83
1991  6.40 3 12.41*** 106.73 9,446.29
1992  3.96 3 12.41*** 106.73 9,331.56
1993  3.42 3 12.41*** 106.73 9,201.61
1994  5.47 3 12.41*** 106.73 9,054.72
1995  5.53 3 12.41*** 106.73 8,888.52
1996  5.82 3 12.41*** 106.73 8,700.37
* This is a margin we have used recently; your margin may be different.
  
** This interest rate reflects a 2 percentage point annual interest-rate cap.

*** This interest rate reflects a 5 percentage point lifetime interest-rate cap.
Note: To see what your payments would have been during that period, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. (For example, in 1996 the monthly payment for a mortgage amount of $60,000 taken out in 1982 would be: $60,000 ÷ $10,000 = 6; 6 × $106.73 = $640.38.)
  • [You will be notified at least 210, but no more than 240, days before first payment at the adjusted level is due after the initial interest rate adjustment of the loan. This notice will contain information about the adjustment, including the interest rate, payment amount, and loan balance.]
  • [You will be notified at least 60, but no more than 120, days before first payment at the adjusted level is due after any interest rate adjustment resulting in a corresponding payment change. This notice will contain information about the adjustment, including the interest rate, payment amount, and loan balance.]

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