CoastHills Credit Union Mortgage - ARM Disclosure Statement

EARLY ARM DISCLOSURE STATEMENT

CoastHills Federal Credit Union

P. O. Box 8000, Santa Maria, CA 93456

IMPORTANT LOAN INFORMATION - PLEASE READ INFORMATION BELOW CAREFULLY:

You should carefully read this disclosure; the promissory note, deed of trust or mortgage; any riders; and all other documents that you will be asked to sign if you accept an ARM loan.

ADJUSTABLE RATE MORTGAGE MEANS YOUR PAYMENT MAY CHANGE IN THE FUTURE. You are applying for an Adjustable Rate Mortgage (ARM) loan. This means that your interest rate and monthly payments may change during the life of your loan. Your monthly payments will increase if the interest rate rises and decrease if it falls. The date or dates on which changes can occur (referred to in this disclosure as "Change Date") will be specified in the ARM loan documents. This ARM is based on the terms and conditions set forth in this disclosure and in the loan documents. We have based this disclosure on recent interest rates, index and margin values, discounts, and fees. Ask us for our current interest rate and margin.

An ARM is different from a fixed-rate mortgage loan. For a fixed-rate loan, the monthly payments of principal and interest do not change during the life of the loan. You should consider carefully which type of loan is best for you.

HOW YOUR INTEREST RATE IS DETERMINED. Your interest rate will be determined by means of an index that may change from time to time.

THE INDEX. The interest rate change on this ARM will be based on an interest rate index (referred to in this disclosure as the "Index.") The Index for a 5-5 ARM is UST5YW and for the 15-15 ARM is UST10YW. Information about the index is available in the Federal Reserve Statistical Release H-15 (www.federalreserve.gov/releases/h15).
INTEREST RATE. Your interest rate is based on the Index value plus a margin, rounded to the nearest 0.125 percent. A change in the Index generally will result in a change in the interest rate. The amount that your interest rate may change also may be affected by the periodic interest rate change limitations and the lifetime interest rate limits, as discussed below.
INITIAL INTEREST RATE DISCOUNT. Your initial interest rate will be discounted and will not be based on the Index sed to make later adjustments. You should note, however, that because your initial interest rate will be discounted, your interest rate may increase on the first Change Date even if the Index remains the same or decreases. Ask us for the amount of the current interest rate discount.
INTEREST RATE ADJUSTMENTS.
- Your interest rate under the 5-5 ARM can change after 60 months and every 60 months thereafter. Your interest rate cannot increase or decrease more than 2.000 percentage points at first adjustment and 2.000 percentage points per subsequent adjustment from the initial interest rate excluding any buydown. Your interest rate will never be greater than 5.000 percentage points above the initial interest rate or lower than your initial interest rate.
- Your interest rate under the 15-15 ARM can change once after 180 months. Your interest rate cannot increase or decrease more than 5.000 percentage points at that adjustment with no further subsequent adjustments from the initial interest rate excluding any buydown. Your interest rate will never be greater than 5.000 percentage points above the initial interest rate or lower than your initial interest rate.
HOW YOUR PAYMENTS ARE DETERMINED. Your initial monthly payment of principal and interest will be determined based on the interest rate, loan term, and balance when your loan is closed. Your payment will be set to amortize the loan over a period of 360 payments.
FREQUENCY OF PAYMENT CHANGES.
- Based on increases or decreases in the Index, payment amounts under the 5-5 ARM loan can change after 60 months and every 60 months thereafter. However your monthly payment could change more frequently if there is a change in the taxes, assessments, insurance premiums, or other charges required to be made into an escrow or impound account.
- Based on increases or decreases in the Index, payment amounts under this 15-15 ARM loan can change after 180 months with no further subsequent adjustments. However your monthly payment could change more frequently if there is a change in the taxes, assessments, insurance premiums, or other charges required to be made into an escrow or impound account.
LIMITATIONS ON INTEREST RATE PAYMENT CHANGES.
- For the 5-5 ARM loan, your interest rate will not increase or decrease on the first change date by more than 2.000 percentage points from the initial interest rate excluding any buydown. After the initial adjustment period, your interest rate will not increase or decrease by more than 2.000 percentage points per year. Your interest rate cannot increase more than 5.000 percentage points above the initial interest rate (excluding any buydown) over the life of the loan.
- For the 15-15 ARM loan, your interest rate will not increase or decrease on the first change date by more than 5.000 percentage points from the initial interest rate excluding any buydown, with no further subsequent adjustments. Your interest rate cannot increase more than 5.000 percentage points above the initial interest rate (excluding any buydown) over the life of the loan.
ADJUSTMENT NOTICES.
- For the 5-5 ARM loan, changes to the interest rate may occur every 5 years. The Note Holder will deliver or mail to you a notice of any changes in the loan's interest rate and the amount of the monthly payment before the effective date of any change. The first notice will be delivered at least 210 days but no more than 240 days before the first adjustment payment is due. A second notice will be delivered at least 60 days, but no more than 120 days, before the first adjusted payment is due. Thereafter, subsequent changes will be delivered or mailed to you at least 60 days but no more than 120 days before the following adjusted payments are due.
- For the 15-15 ARM loan, a single change in interest rate will occur on the 15th year. The Note Holder will deliver or mail to you a notice of change in the loan's interest rate and the amount of the monthly payment before the effective date of the change. The notice will be delivered at least 210 days but no more than 240 days before the adjustment period. You will receive a second notice delivered at least 60 days, but no more than 120 days, before the first adjusted payment is due.
- For Home Equity Line of Credit (HELOC) loans, the change in the interest rate may occur on a monthly basis. Disclosure of the rate change and payment change will be provided on your monthly credit union statement under the HELOC subsection each month. Notice of these terms will be provided during the consummation process.

HOW YOUR PAYMENT CAN CHANGE ("Worst Case Scenario").

For the 5-5 ARM loan, your payment can change every 60 months based on changes in the loan term, interest rate, or loan balance. For example, on a $10,000 loan with a 360 month term and an initial rate of 5.875 (based on a margin of 2.25 and index of 4.120 rounded to the nearest 0.125%), the maximum amount that the interest rate can rise under this ARM program is 5.000 percentage points above the initial interest rate and the payment can rise from a first-year payment of $59.15 to the maximum of $86.65 in the 16th year.
For the 15-15 ARM loan, your payment can change every 180 months based on changes in the loan term, interest rate, or loan balance. For example, on a $10,000 loan with a 360 month term and an initial rate of 6.625 (based on a margin of 1.500 and index of 4.130 rounded to the nearest 0.125%), the maximum amount that the interest rate can rise under this ARM program is 5.000 percentage points above the initial interest rate and the payment can rise from a first-year payment of $64.03 to a maximum of $85.78 in the 16th year.
To see what your payment would be, divide your mortgage amount by $10,000, then multiply the monthly payment by that amount. For example, the monthly payment for a new loan amount of $60,000 would be $60,000 divided by $10,000 = 6. Multiply the payment amount by this number, e.g. 6x$64.03 = $384.18.

PREPAYMENT. You may pay this ARM loan in whole or part without penalty at any time. If you are paying more than your regularly scheduled payment, you must notify us as to how you want the funds applied.

DEMAND FEATURE. This loan does not include a demand feature.

DISCLOSURES FOR OTHER ARM PROGRAMS. Available on Request.

BORROWER ACKNOWLEDGEMENT. After having read the contents of the above disclosure. I/we acknowledge receipt of this disclosure and further acknowledge that this disclosure was completed in full prior to its receipt. I/we also acknowledge receipt of the handbook entitled "Consumer Handbook on Adjustable Rate Mortgages."

HELOC EARLY DISCLOSURE & TERMS OF LINE OF CREDIT PLAN

This disclosure contains important information about our home equity line of credit (HELOC). You should read it carefully and keep a copy for your records.

Availability of Terms: All terms described below are subject to change. If these terms change (other than the annual percentage rate) and you decide not to enter into an agreement with us, you are entitled to a refund of any fees you paid to us or anyone else in connection w/your application.

Security Interest: We will take a mortgage on your home. You could loose your home if you do not meet the obligations in your agreement with us.

Possible Actions: We can terminate your line and require you to pay us the entire outstanding balance in one payment if:

You engage in fraud or material misrepresentation in connection with the line of credit.
You do not meet the repayment terms.
Your action or inaction adversely affects the collateral or our rights in the collateral.

We can refuse to make additional extensions of credit or reduce your credit limit if:

The value of the collateral securing the line of credit declines significantly below its appraised value for purposes of the line of credit.
We reasonably believe you will not be able to meet the repayment requirements due to a material change in your financial circumstances.
You are in default of a material obligation in the agreement.
Government action preventus us from imposing the annual percentage rate provided for or impairs the priority of our security interest such that the value of the interest is less than 120% of the credit line.
The maximum annual percentage rate is reached.
The Initial Agreement permits us to make changes to the terms of the Agreement at specified times or upon the occurrence specified events.
A regulatory agency has notified us that continued advances would constitute an unsafe and unsound practice.

Minimum Payment Requirements: You can obtain advances of credit for 10 years. This period is referred to as the "Draw Period". During the draw period, payments will be due monthly. Your minimum monthly payment will equal the finance charges (interest) accrued on the outstanding balance during the billing period. The minimum payment during the draw period will not reduce the principal that is outstanding on your line.

After the draw period ends, you will no longer be able to obtain credit advances and must repay the outstanding balance over 15 years referred to as the "Repayment Period". During the repayment period, payments will be due monthly. Your minimum monthly payment will equal the balance outstanding the end of the draw period plus finance charges that have accrued on the outstanding balance during the billing cycle.

Minimum Payment Example: If you took a single $10,000 advance and the annual percentage rate was 5.500%. It would take 25 years to pay off the advance if you only made the minimum payment. During the draw period, you would make 120 monthly payments of $45.83, followed by 180 monthly payments of $81.71 during the repayment period.

Recovery of Cost Fees: The following closing costs are estimated to be paid on your behalf in the amount referenced.

Appraisal $435.00
Credit Report Fee: $319.15
Tax Service Fee: $81.00
Flood Zone Certification $9.00
Settlement/Closing Fee $14.45
Lender's Title Insurance $165.00
Recording Fee $337.00
Total: $1210.60

If this line of credit is paid off and closed within three years of the origination date, you will be responsible for previously waived closing costs, to a maximum of $500. You understand these are the actual closing costs paid by the credit union on your behalf. Unless otherwise noted, all fees will be paid at closing.

Minim Draw Requirement: There is no minimum credit advance required.

Deductbility: You should consult a tax advisor regarding the deductbility of interest and charges for the line.

Variable Rate Feature: The line has a variable rate feature, and the annual percentage rate (corresponding to the perioic rate) and the minimum monthly payment can change as a result. The annual percentage rate includes only interest and not other costs.

The annual percentage rate is based on the value of an index. The index is the highest "Prime Rate" as published in the "money Rates" table of the online or print edition of The Wall Street Journal. To detmine the annual percentage rate that will apply to your line, we add the margin to the value of the index. If the annual percentage rate is not already rounded, we then round to the nearest 0.125%. Ask us for a current index value, margin, and annual percentage rate. After you open a line of credit, rate information will be provided in monthly billing statements that are sent to you.

Rate Changes: The annual percentage rate can change monthly. The rate cannot increase or decrease more than 2.00% at each change date or in any 1-year period. The maximum annual percentage rate that can apply is 18.00% or the maximum permitted by law, whichever is less. However, under not circumstances will your annual percentage rate go below 4.00% at any time during the term of the plan.

Maximum Rate & Payment Examples: If you had an outstanding balance of $10,000 during the draw period, the minimum monthly payment at the maximum annual percentage rate of 18.00% would be $150.00. If you had an outstanding balance of $10,000 during the repayment period, the minimum monthly payment at the maximum annual percentage rate of 18.00% would be $161.04. This anual percentage rate could be reached in 9 years.

Historical Example: The following table shows how the annual percentage rate and the minim monthly payment for a $10,000 outstanding balance would have changed based on the changes in the index over the past 15 years. The index values are from the first business day of January each year. While only one payment amount per year is shown, payments during the repayment period would have varied during each year.

The table assumes an outstanding balance of $10,000. That only the minimum payments were made and that the rate remained constant during each year. This does not necessarily indicate how the indext of your payments will change in the future.