Sec. 80.6. Adjustments to rate, payment, balance or term

Except for such further limitations on adjustments (i.e., “ ceilings”, “floors” or “initial discounts”) as may be set forth in the loan contract:

(a)

(1) adjustments to the interest rate shall correspond directly to the movement of an interest-rate index or of an index that measures the rate of inflation, which index is readily available to and verifiable by the borrower and is beyond the control of the lender; provided that a lender may decrease the interest rate at any time, and provided further, that interest rate adjustments may be rounded to the nearest fraction of a percentage point when so stated in the contract. A lender may also increase the interest rate pursuant to a formula or schedule that specifies the amount of the increase, the time at which it may be made, and which is set forth in the loan contract;

(2) adjustments to the monthly payment and loan balance may be made to reflect interest- rate adjustments and, in the case of a payment adjustment, where the adjustment reflects change in the loan balance or is made pursuant to a formula or schedule specifying the percentage or dollar change in the payment, as set forth in the contract;

(3) any combination of indices or a moving average of index values may be used as an index, but a lender may not change or reserve the right to change the index or indices specified in the loan contract unless the initial index or indices specified become(s) unavailable during the term of the loan; and

(4) the loan term may be adjusted only to reflect a change in the interest rate, the payment or the loan balance.

(b) Mortgage bankers.

(1) Mortgage bankers may use any single index from among the indices approved by the Superintendent of Banks pursuant to Superintendent's Regulations, Part 334, on such terms as stated therein. Adjustments in the rate for the loan shall correspond directly to the movements of the index. As provided in section 590-a(3) of the Banking Law, the interest rate of the junior mortgage loan must be reduced in proportion to any decrease in the index rate, while increases in the interest rate based upon changes in the index rate may be made at the option of the mortgage banker. Although any loan may only use a single index for the life of the loan, the mortgage banker may provide for the use of an index similar to the index actually used in the event that the latter index should become unavailable for use during the term of the loan.

(2) The loan contract may provide for payment adjustments to be made pursuant to a formula or schedule specifying the percentage or dollar change in the payments. The loan term may be adjusted only to reflect a change in the interest rate and adjustments to the payment.