My lender is using the wrong index when resetting my ARM. Help!

Q: I think my lender is using the wrong index when resetting my ARM's interest rate. What do I do?

A: There can be instances where the mortgage lender can change the index used to govern your adjustable rate mortgage. This is usually allowed in instances where a given index is no longer made available by its source; in such cases, a substitute can be used. This most recently happened with the merging of a number of banking regulators, which discontinued certain cost-of-funds indexes, for example.

That said, if you have documentation which shows that it should have been a LIBOR-based ARM, or it was a Treasury-based ARM where they used the LIBOR, for example, you should get in touch with your mortgage servicer as soon as possible.

It might also be a good idea to thoroughly review your mortgage note or adjustable-rate rider to determine the proper index name and source, and even take the time to calculate what your interest rate should have been at each adjustment, so you can know whether or not you might be due a refund.

To double check your lender’s calculation, be sure to utilize’s ARM Rate Check Kit. This kit explains step-by-step how to calculate your new interest rate.

In the event of an error in the adjustment of an ARM's interest rate, regulations generally required that the lender is liable for any overcharges, while you are not responsible for any shortages as a result of the lender's error.

Honest mistakes can and do happen. Also, you might even find that things have worked out in your favor, for now at least. Still, that is unlikely to always be the case, so you'll want to correct the error sooner rather than later.

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President,
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
Submitting your question...

Question received! Check back later to see if your
question gets published.

Q: Can my friends and I buy a house together?
JUL 18, 2021

The answer is "yes," you can certainly all buy a house together.

Read More
Q: What is the difference between "rate" and "APR"?
APR 26, 2021

APR is perhaps the most misunderstood part of mortgage finance. "Rate", or more properly "contract interest rate" is the actual rate of interest you are being charged...

Read More
Q: How do I find out who owns my mortgage?
MAR 15, 2021

The owner of the loan is most often the "investor" -- the entity who put up the actual funds to make your mortgage happen.

Read More
Add to Homescreen?
Install this web app on your phone :tap and then Add to homescreen