Loans > Loan Screens > Account Information Screen Group > ARM Information Screen > ARM Detail tab

The Periodic Rate Caps field group, which appears on both the ARM Detail and Rate Caps & Negative Amortization tabs of the ARM Information screen, contains rate cap information for the account.

laiarmi_periodicrate

The fields in this field group are as follows:

Field

Description

Use Rate Cap

Mnemonic: LNRCAP

The periodic rate cap sets a limit on the interest rate for the loan. The interest rate is not allowed to adjust above or below this cap. For example, a loan that guarantees the rate will increase no more than 2% per year has a periodic rate cap. This checkbox defaults to unchecked. Place a checkmark in this field if a rate cap is to be used.

The other fields in this field group (excluding Delay Cap below) are needed in order for the rate cap to function properly.

Delay Cap

Mnemonic: LNDCAP

If this checkbox is not checked (default), the periodic rate caps will be used when calculating new rates. If a checkmark is displayed, the system will ignore the periodic rate caps when calculating new rates until the calculation is for the rate effective on the date in the Start of Accrual Period field below.

Maximum Points Up/Down

Mnemonic: LNAMRU, LNAMRD

Use these fields to indicate the maximum and minimum points per period that the loan accrual rate can be increased. These fields will only work when there is a checkmark in the Use Rate Cap field above.

Start of Accrual Period

Mnemonic: LNAMPD

This is the starting date of the current rate cap period on this loan. This field is automatically updated based on the Length of Rate Cap Period field below and is only used when there is a checkmark in the Use Rate Cap field above. Enter the date using MMDDYYYY format, or use the drop-down calendar to select the date. See below for more information.

This date is essential in capping rates for a period. If a wrong date is entered here, rate caps will not function. The date must be exactly one length of rate cap period behind the date in the Next Rate Change Date. The rate cap period is determined to be from the Start of Accrual Period date to one length of rate cap period in the future plus one day. If a wrong start date is entered, the system may determine that the period has passed, and rate caps will not apply.

For example, if rates roll on a yearly basis, and the Next Rate Change Date is 06-01-08, then the Start of Accrual Period date must be 06-01-07.

For new loans, this field must be manually entered. The date should be the same date as the Date Last Accrued on the Loans > Account Information > Account Detail screen. After the first setup, the system will roll automatically.

Rate at Period Start

Mnemonic: LNAMSY

This is the rate at the start of the rate cap period. Maximum and minimum points upward or downward will key off this rate for the rate cap period.

Length of Rate Cap Period

Mnemonic: LNAMLP

This is the length of the rate cap period and must be entered in months. This field is only used when there is a checkmark in the Use Rate Cap field.

Rate Change Minimum

Mnemonic: LNAMCM

This is a percent field. Enter “2.00000” for 2%. This is the minimum percentage by which the loan rate can be changed. (For example, if 2% is in this field, the new rate must be at least 2% higher or lower than the current rate or the rate will not change.) See below for more information.

The new rate is calculated as follows:

The rate is pulled from the rate table and added to the margin. (This becomes the work rate.) Subtract the work rate from the current rate. Compare the result to the Rate Change Minimum field. If the result is higher than this field, the work rate will become the new rate. If it is lower, the rate won’t change.

Example: A loan is currently at 8%, with a rate change minimum of 2.00000 (2%) and a margin of 1%. At rate change time, the rate table is 8.5%. The new work rate would be 9.5. The old rate (8.00) is subtracted from the work rate (9.5) for a difference of 1.5. This is less than the rate change minimum of 2.00000, so the loan rate will not change.

If the work rate were 10.5 (for a difference of 2.50), the work rate would become the new loan rate.