This disclosure describes the features of an Adjustable Rate Mortgage (ARM) program you are considering. Information on other ARM programs available from your Lender will be provided upon request.

How Your Interest Rate Can Change:

Your interest rate will be based on an index rate plus a margin. Please ask us for our current interest rate an margin. Your initial interest rate may also reflect a discount. Please ask us about our current interest rate discount. The index is the weekly average yield on Untied States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board. The index for your loan will be that which is the most recent figure available as of date 45 days before change date occurs.

Your interest rate will equal the index rate plus our margin rounded to the nearest 1/8 percent, unless your interest rate "caps" limit the amount of change in the interest rate.

Your principal and interest payment will be based on the interest rate, loan balance, and remaining loan term. Changes in the interest rate will result in an increase or decrease in your monthly payment.

How Your Interest Rate Can Change:

After the initial 3-year period, where the rate is fixed, your interest rate can change every 12 months to the index value plus the margin, subject to the following limits.

Your interest rate will be rounded to the nearest 1/8 percent.

Your interest rate cannot increase or decrease more than 2% per annual adjustment.

Your interest rate cannot increase or decrease more than 6% over the term of the loan:

Example of a $10,000 Loan 3/1 Adjustable-Rate Mortgage (ARM)

The first example below shows the initial interest rate and payment amount for a loan under this ARM program based on the rate in effect as of July 1998. The second example shows the maximum interest rate and payment amount assuming the maximum periodic increase in rates and payments under this program. The third example shows you how to calculate your monthly principal and interest payment. These examples are based upon the following assumptions:

Loan Amount $10,000.00 Annual Cap 2.00%

Loan Term (see below) Initial Adjustment Cap 2.00%

Payment Adjustment 12 months Lifetime Cap 6.00%

Interest Adjustment 12 months Index Weekly average yield on U.S. Treasury Securities

Index Value 5.41% Adjusted to a constant Maturity of one year

Margin * 2.75%

1. Initial Interest Rate and Payment Amount

   	5-Year Term	15-Year Term	30-Year Term
   Initial Interest Rate ** = 6.50%	$195.66	$87.11	$63.21

   The periodic payment may increase or decrease substantially depending on changes in the rate.

    

2. Maximum Interest Rate and Payment Amount

   	5-Year Term	15-Year Term	30-Year Term
   Maximum Interest Rate = 12.50%	$201.78	$114.71	$103.27

    

3. How to Calculate Your Payment

To see what your monthly principal and interest payment would be, divide your mortgage amount by $10,000, then multiply the monthly payment shown in chart number 1 above by that number. For example, based upon the initial interest rate, the monthly payment for a 30-year mortgage of $60,000 would be:

$60,000 divided $ 10,000 = 6 6 x $63.21 = $379.26

* This is a margin we have used recently. Your margin may be different.

** This interest rate reflects the amount of the discount as of July 1998. Your loan may be discounted by a different amount.

You will be notified in writing at least 30 days, but no more than 45 days, before a payment adjustment may be made. This notice will contain information about your interest rates, payment amount and loan balance.

Late Charge:

A payment arriving later than 15 days after it is due will be charged 5% of the principal and interest payment unless otherwise prohibited by law.

Prepayment:

If you pay off the loan early, you will not have to pay a penalty, regardless of the reason for the prepayment. You will not be entitled to a refund of part of the prepaid finance charge, but you may be entitled to a refund of a portion of any prepaid mortgage insurance premium included in the prepaid finance charge.

Sale or Transfer of Your Property:

Your mortgage will contain a due-on-sale clause. This means that if all or part of your property, or any interest therein, is sold or transferred without our written consent (including a sale on land contract), we may require that you pay off your mortgage loan in full within 30 days. There are certain limited exceptions to the due-on-sale clause that will be described in your mortgage.

Right of Rescission:

The federal Truth-In-Lending Act requires that we provide you with the right to cancel your loan transaction in certain cases. You have this right until midnight on the third business day following closing any time we acquire a mortgage on your principal residence. A refinance of a land contract is a rescindable transaction. If your loan is rescindable, we will disburse the loan proceeds at closing into a non-interest bearing escrow account until we are notified that you have not exercised your right to cancel. If your loan is rescindable, you will be given a further explanation of how to exercise your right to cancel at the time of closing.

Principal and Interest Payments, Amortization, Crediting of Monthly Principal Interest Payments:

This loan is amortized based on a 360-day year with equal 30-day months. You can calculate the exact amount of your monthly principal and interest payment only after the interest rate, the loan term and the loan amount have been determined. The terms of the loan will be provided to you in the loan approval letter.

Each monthly principal and interest payments is applied first to pay the interest due for that month and then reduce the outstanding loan balance. The interest portion of your monthly payment will decrease and the principal portion will increase as the loan balance is reduced. The following step-by-step analysis assumes a $50,000,30-year loan at 10% and illustrates how the first monthly principal and interest payments would be applied for all loans.

Step 1 Multiply the loan amount by the interest rate to obtain the amount of interest for one year. (i.e., $50,000 x .10 = $5,000)

Step 2 Divide the interest amount for one year by 360 days to obtain the interest amount for one day. (i.e., $5,000 divide 360 = $13.889)

Step 3 Multiply the interest amount for one day by 30 days to obtain the monthly interest amount. (i.e. $13.889 x 30 = $416.67)

Step 4 Subtract the monthly interest amount from the total principal and interest payment to obtain the principal payment amount. On a $50,000, 30-year mortgage at 10% the principal and interest payment is $438.79. 

Step 5 Subtract the principal payment amount from the previous loan balance to obtain the new loan balance. (i.e. $50,000 - $22.12 = $49,977.88). Thus, $22.12 of the first monthly payment of $438.79 in this example was applied to reduce the principal balance. As the loan balance is reduced, the interest portion of the total monthly payment will decease, and there will be a corresponding increase in the principal portion of the payment.

Escrow Payments:

The loan contract provided that you must make monthly "escrow" payments to us. This applies for all loans except Bridge loans and loans secured by second mortgages. These escrow payments will be an amount equal to one-twelfth of the yearly real estate taxes, assessments, hazard insurance premiums, flood insurance premiums and mortgage insurance premiums, if any, plus a cushion as allowed by the Real Estate Settlement Procedures Act. These amounts, as reasonably estimated by us from time to time, must be paid monthly in addition to the amount of your regular monthly principal and interest payment.

You will also be required to pay a lump-sum escrow payment at the time of loan closing. The amount of this payment will be calculated so that we will have sufficient escrow deposits to pay the first year’s taxes, assessments, hazard insurance premiums, flood insurance premiums and mortgage insurance premiums, if any, as they become due.

The purpose for requiring you to pay these sums is to allow us to protect our security interest in the property. We will make direct payments to the taxing authorities and insurance companies. We do not charge you for maintaining the escrow account or for paying taxes, assessments, and insurance premiums on your behalf.

Once a year your escrow account will be analyzed and a notice advising you of your new monthly escrow requirement will be sent to you. You will have the option of correcting any deficiency by making pro-rated monthly payments or a lump-sum payment. If a surplus exists, you will receive a cash refund of the coverage.

If you fail to make any required escrow payment; we may deduct the amount of the escrow payment from any monthly payments we receive from you. We may also opt to treat your failure to make the escrow payments as default under the loan contract. If we treat your failure to make the escrow payment as default, the balance of your loan may become immediately due and payable. In such case, there may be forced sale of your home.