Indexed Adjustable Rate Mortgage Loans (ARM)

[Features & Benefits] [Frequently Asked Questions]

These are mortgage loans where the rate is fixed for a period of time and indexed to an external interest rate for repricing. ARM products offer fixed pricing terms of 1, 3, 5 or 7 years with maturities between 15 and 30 years.

ARM loans are attractive if you:

Prefer the lower initial interest rate when compared to longer term fixed rates.
Wish to monitor the rate changes based on an external index.
Have the financial strength to handle limited variations in the interest rate.

This product is often priced lower than other full term fixed-rate products, but the rate may adjust higher at a later date. Rate caps protect you from extreme rate movements and are a sound risk management tool.

Repricing rate caps

Interest rates are determined weekly by adding a spread set by GreenStone over the 1-, 3-, 5- and 7-year Federal Farm Credit Bank Index (FFCB). Interest rates are adjusted at the end of the pricing period based on the appropriate FFCB index 45 days prior to the repricing date. ARM loans have a guarantee that rates will not change more than a set amount at each repricing period (interim cap/floor) and also have a maximum lifetime cap. The maximum rate changes for the 4 options are:

Repricing period	Interim cap/floor	Lifetime cap/floor
1 year	2%	6%
3 year	2%	6%
5 year	2%	6%
7 year	2%	6%

You are notified of the new rate and payment amount at least 10 days prior to the due date of the first payment based on the new rate.

You can lock in a rate any time after application, subject to the payment of a rate commitment fee. The rate commitment is good for 75 days, with an option to extend the commitment for up to four 30-day increments for an extension fee.

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Features and Benefits

Feature	Benefit
Competitive interest rates, often priced lower than full fixed rate products.	Minimizes your near term loan expense compared to fixed rate loans.
Adjustable rates: Loan rate follows the market interest rate at a repricing period selected	You are not locked into a rate, this could minimize your loan expense if rates are static or declining.
Caps: Interest rates can't change more than set amounts at each repricing period and has a 6% lifetime cap	Our rate caps provide protection against significant interest rate volatility, helping you control your interest rate risk.

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Frequently Asked Questions

Question

Answer

How can I find the index that my mortgage interest rate is based on?

Information about the index rate is reported by the Federal Farm Credit Banks Funding Corporation at its web site. It can be found in the "publications and archives" section at http://www.farmcredit-ffcb.com. Once in the "publications and archives" section, select weekly estimated funding cost indexes report (published on Mondays). The pertinent chart within the report is Intermediate-Term Funding Index.

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