Q: What is required if a refinance of the ARM is triggered by the LIBOR transition?
A: As stated above in LIBOR Adjustable-Rate Mortgage FAQ 4, under Regulation Z, if the creditor does not select a comparable index during the LIBOR transition when replacing the index of a closed-end loan, the creditor will trigger requirements for a refinance of the transaction.
If a refinancing occurs, the creditor is required to provide new origination disclosures. Comment 20(a)-1. For example, for ARMs, the creditor must provide typical ARM refinance disclosures, including the ARM loan program origination disclosures, a new CHARM booklet, and new TRID disclosures, as applicable.
Additionally, a refinance also triggers new ability-to-repay and qualified mortgage analysis requirements. Comments 20(a)-1 and 3; 12 CFR § 1026.19(b); (e); (f); and § 1026.43.
For more information about the loan program origination disclosures, see LIBOR Adjustable-Rate Mortgage FAQs 1 and 2. For more information about the CHARM Booklet, see LIBOR Adjustable-Rate Mortgage FAQ 3. For more information about the TRID disclosures, see the TRID Small Entity Compliance Guide. For more information about ability-to-repay and qualified mortgage requirements, see the ATR-QM Small Entity Compliance Guide.