Servicing Guide

Published September 9, 2020

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How is the new monthly payment and effective date for an ARM Loan Conversion determined?

The following procedure provides instructions for determining the new monthly payment and effective date, in accordance with C-2.3-01, Processing ARM Conversions to Fixed Rate Mortgage Loans.

To calculate the new monthly payment, the servicer must determine the amount required to repay the UPB of the ARM loan

  • in substantially equal payments,
  • over the remaining term of the mortgage loan, and
  • at the new fixed interest rate.

This new monthly payment becomes effective in the month following the month in which the new fixed interest rate goes into effect, either on

  • the first day of the month; or
  • on the applicable due date, if the mortgage loan has a payment due date other than the first of the month.

For more information please see F-1-01, Servicing ARM Loans

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