Loan Screens > Account Information Screen Group > ARM Information Screen > ARM Detail tab > Rate Information field group

Entry: User, checkbox

F/M: Yes

Mnemonic: LNBSIN and LNBINX

Screen: Loans > Account Information > ARM Information > ARM Detail tab

If the Use This Base Index Rate field is checked (Yes), the Base Index field (unnamed field to the right of the Use This Base Index Rate checkbox) and the Original Rate field will be used to calculate the new interest rate on the loan.

To calculate the new interest rate, the system determines the change between the Base Index field and the Current Index field. If the amount of the change is less than an eighth/tenth/quarter of a percentage point, the change will be rounded to zero. If the amount of the change is an eighth/tenth/quarter or more, the amount of the change will be rounded up/down/nearest to the eighth/tenth/quarter of a percentage point.

If the current index figure is larger than the Base Index field, the rounded change amount will be added to the Original Rate. If the current index figure is smaller than the base index figure, the rounded change amount will be subtracted from the Original Rate.

If there is no change between the Base Index field and the current index figure after rounding, the Original Rate will become the new interest rate.

This calculation also considers lifetime maximum and minimum rates, as well as rate caps, meaning maximum points per period upward or downward.

Example:

Original Rate: 8.875

Base Index: 6.61

Current Index: 4.59

BASE INDEX - CURRENT INDEX = INDEX CHANGE

6.61 - 4.59 = 2.02

rounded to nearest one-eighth = 2.00

ORIGINAL INTEREST RATE - CHANGE AMOUNT = NEW INTEREST RATE

8.875 - 2.00 = 6.875

WARNING: If the loan is set up to use the Use This Base Index Rate field and the Base Index field, and the loan is sold to an investor, you must use the service fee type code “C” (constant) and have a service fee rate entered on the Loan Investor Fields screen.