Which of the following is false about adjustable rate mortgage (ARMs) loans?
A) There are special regulations in the U.S. for adjustable rate
Mortgage loans including the indexes that can be used and requirements that lenders explain to borrowers exactly how the interest rate is related to an index and how it will be adjusted as the index changes, with a 15-year history of the index provided.
B) Banks have limits called caps on the size of the periodic rate
Adjustments, and an overall cap is required by federal law.
C) Borrowers with ARMs are never allowed to switch to fixed rate mortgages.
D) ARMs increase the credit risk for a loan, if interest rates rise.
Correct Answer:
Verified
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