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There does not appear to be any statutory reference for 110% negative amortization cap in New York state as state banking regs note that the recast amount can be up to 125%. Can anyone provide a statutory reference (including state or federal guidance)? Srlevine1 00:21, 10 March 2007 (UTC)
There are new hybrid neg am loans which are just straight (libor based) Hybrid ARMs with 3-5-7-10 yr terms theneg am occurs because the lender allows the borrower to pay back 40 or 50% of the fully amortizing payment. (P+I) Also there is increasing usage of option arms with 7 or 10 yr recast periods as well. These loans typically have a higher start rate (2.95-3.95%) to offset potential neg am.
There is an error in the cap section. The 7.5% is merely the minimum payment cap. The writer of that section was looking at it backwards. 1% increase in a 5% loan is a 20% change true... but a 7.5% change in 1% payment rate is merely 1.075 payment rate. compound that over 5 years and the change is statistically insignificant which makes his/er statement highly misleading.
Under typical circumstances it lists that it is safer to be in a neg am loan in a falling interest rate market as opposed to rising. NegAm loans are in fact safer in a rapidly appreciating market regardless of interest rate. This is because it generally only takes 2-3% appreciation to offset negative amortization accrual on average.
There are also new loans that are only a "little bit negam". These are loans that have a fixed interest only payment that also allow a borrower to pay around 3% less in interest. This allows a borrower to have a lower payment without too much negative amortization.
I have several useful negative amortization (or minimum payment option) mortgage calculators on my website.
Here is one, it may be helpful to users: Minimum Payment Mortgage Calculator