|A new program combines the low payment of an adjustable rate mortgage with the safety of a fixed rate and will soon be made available to brokers and correspondents.
The New York Mortgage Company LLC announced the launch of the Homeowner Protection ARM, a product that offers “long-term protection against rising rates along with automatic participation in falling rates,” without negative amortization.
The new loan is a 30-year mortgage that starts at 6.50% for three months and has a 6.99% cap for the first 10 years, with a floor of 4.0%. The rate, which is pegged to the 1-month London Interbank Offered Rate and adjusts monthly, has a margin of 1.5 percentage points over LIBOR, for a fully-indexed current rate today of 6.875%. The annual percentage rate is 7.182%, according to the announcement.
While the new ARM isn’t yet available to brokers and correspondent lenders, “we expect to roll a version very shortly,” company spokeswoman Kristen Olson said.
“This is the first monthly adjustable rate mortgage that almost totally insulates the borrower from interest rate risk for a period of ten years,” said company President Steven Schnall in the announcement. “The ten-year rate cap on this loan is only negligibly higher than the prevailing rates on a ten-year ARM or 30-year fixed mortgage, yet unlike these other loan programs, our rates will drop should market rates drop. The advantage to the borrower is clear and unmistakable.”
New York Mortgage operates online at www.NYMC.com.
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com. e-mail: [email protected]