4401.8: Underwriting requirements for ARMs (11/15/2017)

(a) Special ARM qualifications

For 1/1 ARMs, 3/3 ARMs, 5/5 ARMs, , 3/1 ARMs, 5/1 ARMs that are less than one year old at the time of delivery, the initial Note Rate cannot be more than three percentage points below the fully-indexed rate. For purposes of this Section 4401.8, the fully-indexed rate is the sum of the Margin plus a value of the applicable Index at any time within 90 days preceding the Note Date, rounded to the nearest one-eighth of 1% (0.125%).

(b) Calculating Borrower ratios for ARMs

For all ARMs, the Borrower must be qualified as follows:

ARM Type	Borrower Qualified at
1/1 ARM 3/1 ARM 3/3 ARM 5/1 ARM 5/5 ARM	No less than the greater of the Note Rate plus two percentage points or the fully-indexed rate
7/1 ARM 10/1 ARM	For Mortgages with Application Received Dates prior to January 10, 2014, no less than the Note Rate. For Mortgages with Application Received Dates on or after January 10, 2014, no less than the: Note Rate for Mortgages that are not Higher-Priced Covered Transactions (HPCTs) or Higher-Priced Mortgage Loans (HPMLs) Greater of the Note Rate or the fully-indexed rate for Mortgages that are HPCTs or HPMLs

(c) Buydowns

For ARMs that are Financed Permanent Buydown Mortgages and ARMs with temporary subsidy buydown plans, the Borrower must be qualified in accordance with the requirements of this section.For additional buydown provisions related to ARMs, refer to Section 4204.4 for ARMs with temporary subsidy buydown plans and Chapter 4601 for Financed Permanent Buydown Mortgages.