In order to insure an adjustable rate mortgage, the insured instrument must disclose the following:
1. That the mortgage is a variable rate mortgage, or when applicable, to the negative amortization provisions.
2. That the interest rate may change
3. The beginning or initial rate of interest. The index to which the change is tied (this must be an index that is determined and published by an entity other than the lender itself)
4. Frequency of changes, and
5. The limit by which the interest rate can change each time or the maximum amount by which it can change over the life of the loan. (This requirement is satisfied if the mortgage or deed of trust reveals the entire formula for calculating the change in interest rate.)
This endorsement is generally issued with a loan policy on residential property only. Contact Agents National Title underwriting counsel before issuing such an endorsement on commercial transactions.