Establishing Interest Rate Cap Reserves

Requirements

You must ensure that the BorrowerBorrowerPerson who is the obligor per the Note. has a cash reserve to purchase a replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. if the term of the initial Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. is less than the term of the SARM Loan.

If the initial Interest Rate Cap AgreementInterest Rate Cap AgreementContract setting forth the terms and conditions of an Interest Rate Cap, Hedge, or Swap. has a term of 5 years, the BorrowerBorrowerPerson who is the obligor per the Note. must fund the cash reserve with each monthly Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or  a mortgage debt obligation with a Fannie Mae credit enhancement. payment during the term.

If the initial cap has a term of more than 5 years, the Borrower’sBorrower’sPerson who is the obligor per the Note. monthly reserve payments for a replacement cap must start no later than 5 years before the existing cap expires.

You must calculate the monthly reserve payments for the first 6-month period using the estimated cost of the replacement Interest Rate CapInterest Rate CapInterest rate agreement between the Borrower and a provider for which the Borrower receives payments at the end of each period when the interest rate exceeds the Cap Strike Rate.  The Interest Rate Cap provides a ceiling (or cap) on the Borrower's Mortgage Loan interest payments. .