According to the Truth-in-Lending Act, what must servicers notify borrowers about regarding changes in interest rates on an ARM loan?

• A. At least 15 days before the change
• B. At least 25 days prior to the change
• C. Immediately after the change
• D. Only if the change is greater than 1%

Answer: (B)

The Truth-in-Lending Act (TILA) mandates that servicers notify borrowers of any changes to interest rates on adjustable-rate mortgage (ARM) loans in a timely manner. The requirement specifies that borrowers must receive a notice at least 25 days before the interest rate changes take effect. This advance notification enables borrowers to understand upcoming changes to their payment amounts and to plan accordingly.

The 25-day notice period is crucial for borrowers as it offers them an opportunity to evaluate their financial situation, consider refinancing options, or take any necessary steps to manage their loan better. The emphasis on this timeframe reflects the Act's goal of promoting transparency and informed decision-making for consumers in the mortgage process.