Six months' notice to reset hybrid ARMs (Sec. 1418)
During the mortgage meltdown of the past few years, many homeowners were caught by surprise when the low initial rate of their adjustable-rate mortgages expired and their mortgage loans reset to a sharply higher mortgage rate with a correspondingly high monthly payment. Such mortgage-rate resets often happened without warning, putting substantial pressure on homeowners already squeezed by the worsening economy.
The new financial reform law aims to prevent unpleasant interest rate surprises by informing homeowners at least six months ahead of time of an introductory mortgage-rate reset. Along with the notice, lenders will have to include an explanation of how the new mortgage rate will be set, a good faith estimate of the monthly payment, a list of alternative financial options and contact information for credit counseling agencies.