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Adjustable Rate Mortgage Loan Program Disclosure

This disclosure describes the features of MECU’s Adjustable Rate Mortgage (ARM) programs.

 
How Your Interest Rate And Payment Are Determined:

Your adjustable interest rate following the initial fixed rate term will be based on an index plus a margin. The index is the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year. Information about the index is published weekly in the Wall Street Journal. The margin to be added to the index is provided in Table A - listed in the next section "How Your Interest Rate and Payment Can Change."

Your adjustable interest rate will equal the index plus our margin rounded to the nearest 1/8 percent, unless your interest rate "cap" limits the amount of change in the adjustable interest rate.

Your payment will be based on the interest rate, loan balance, and the remaining loan term.

 
How Your Interest Rate Can Change:

Your initial interest rate will remain fixed for the first 3, 5, 7 or 10 years. The initial interest rate will change to an adjustable interest rate on the first day following the end of the fixed term. For example, on a 3/1 ARM the rate will change to an adjustable interest rate on the first day of the 37th month and on a 5/1 ARM the rate will change on the first day of the 61st month. The interest rate may continue to change on that day every 12th month thereafter.

The interest rate and payment change will be subject to the following limits:

  3 / 1 ARM
Rate fixed for 36 months
5 / 1 ARM
Rate fixed for 60 months
7 / 1 ARM
Rate fixed for 84 months
10 / 1 ARM
Rate fixed for 120 months
Table A
Max. Initial Rate
Adjustment
2.000% 2.000% 2.000% 5.000%
Max. Subsequent Rate
Adjustments
2.000% 2.000% 2.000% 2.000%
Lifetime Rate Cap 5.000% 5.000% 5.000% 5.000%
Initial Monthly Payment * $408.24 $414.89 $428.38 $435.21
Highest Possible
Monthly Payment **
$681.33 $670.46 $668.25 $653.78

* Initial payment is based on a $100,000 loan amortized over 30 years with an initial interest rate of: 2.750% on the 3/1 ARM, 2.875% on the 5/1 ARM, 3.125% on the 7/1 ARM, and 3.250% on the 10/1 ARM.
** The Highest Possible Monthly Payment scenarios are based on a $100,000 loan amortized over 30 years at the initial interest rate stated in the preceding sentence under the assumption that the interest rate will increase as rapidly as possible during the adjustable rate term.

Your interest rate will be rounded to the nearest 1/8 percent (0.125%).

Your interest rate cannot increase by more than the above stated Lifetime Rate Cap nor will it decrease below your original start rate over the term of the loan.

We will deliver or mail to you a notice of any changes in your initial fixed interest rate to an adjustable interest rate and of any changes in your adjustable interest rate before the effective day of any change. This notice will include the amount of your monthly payment, any information required by law to be provided to you and the title and telephone number of a person who will answer any question(s) you may have regarding the notice of change.

 
Late Charge:

If your payment arrives later than 15 days after it is due you will be charged 5.00% of the monthly payment.

 
Assumption of Loan:

Someone buying your home may not be allowed to assume the remainder of the mortgage on the original terms.

 
Due On Sale:

If all or any part of the property securing the ARM or any interest in it is sold or transferred (or if beneficial interest of the Borrower is sold or transferred and the Borrower is not a natural person) without the Lender's prior written consent, the Lender may, at its option, require immediate payment in full of the loan.

 
Escrow Payments:

Your total monthly payment may also include an escrow payment with your monthly payment of principal and interest. These escrow payments will be put into an escrow account so that we can pay large semi- annual or annual expenses associated with your property when they are due. These expenses can include yearly property taxes, assessments, ground rents and yearly mortgage and hazard insurance premiums, as applicable to your property.

The escrow payment is calculated as the estimated annual total of the Escrow Expenses divided by the number of payments that are due per year.

If you fail to make an escrow payment when due, the Lender will have the right to deduct it from your monthly payment and require you make up the difference. The Lender may also reject any monthly payment which is less that the amount of principal, interest and monthly escrow payment due, and exercise the rights provided in the contract regarding default for late or delinquent payments.

Once a year, your escrow account will be analyzed to assure that the proper amount of funds is being collected monthly. At this time, a new escrow payment will be calculated as the estimated annual total of your current Escrow Expenses less your current escrow balance, divided by the number of payments that are due per year.

When the entire mortgage balance has been repaid to the Lender, any amounts left in the escrow account after the necessary Escrow Expenses have been paid will be returned to the borrower. If insufficient funds are available in the escrow account to pay necessary Escrow Expenses, the additional expense amount shall be immediately due and payable by the borrower.

 
Additional Information And Resources:

For additional information and resources pertaining to Adjustable Rate Mortgage loans, review the Understanding Adjustable Rate Mortgages handbook.

 
Updated February 8, 2016

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