Sierra Capital offers a Float-to-Fixed-to-Float Program
for newly originated mortgages. Borrowers who choose this option can take advantage
of low short-term floating rates to maximize cash flows early on, lock in a
Fixed-Rate for the remainder of the term up front in order to eliminate the
risk of rising rates in the future, and still have up to a year of Floating-Rate
debt at the end of the loan to arrange an exit strategy.
The Float-to-Fixed-to-Float Program will have an initial
one- or two-year period at a Floating-Rate based on the yield of the one-month
Freddie Mac Reference Bill® index. This will be followed by a Fixed-Rate
period that will be priced based on the yield on the Treasury security selected
by Freddie Mac with a maturity similar to the combined initial Floating-Rate
and Fixed-Rate periods. The spread on the initial Floating-Rate period and the
interest rate for the Fixed-Rate period will be locked at Early Rate-Lock application
or commitment. Yield maintenance will apply for the initial Floating and Fixed-Rate
periods of the mortgage, with the matching maturity Treasury described above
serving as the reference security. The conversion from Float to Fixed and back
to Float will be automatic; re-underwriting will not be required. The underwriting
will be based on the Fixed interest rate and the parameters associated with
the underlying loan type will apply. At the end of the Fixed-Rate period, Borrowers
can extend their loan term for one year, at which time the mortgage rate will
automatically convert to a Floating Rate equal to 250 basis points over the
one-month Freddie Mac Reference Bill® index.
Float-to-Fixed-to-Float Program Guidelines
Eligible Mortgage Products:
Conventional first mortgages
Other products eligible on a case-by-case basis
Underwriting Rate:
The Fixed interest rate
Amortization:
Amortizing, Partial Interest-Only (IO during initial Floating-Rate period)
or Interest-Only
Conversion:
Automatic: Loan will not be re-underwritten at conversion from initial
Floating-Rate period to Fixed-Rate period or when extended to final
Floating-Rate period.
Early conversion to Fixed Rate of interest not allowed
Other Terms and Conditions:
Other terms and conditions of applicable mortgage product apply
Actual/360 interest calculations for all periods
Initial Floating-Rate Period Guidelines
Floating Rate Term:
1 or 2 years
Prepayment Provisions:
Prepayable in full, subject to a yield maintenance premium based on the
combined initial Floating-Rate period and Fixed-Rate period
Pricing:
Spread of 250 basis points over the 1-month Freddie Mac Reference Bill®
index
Interest-Rate Cap:
Not required
Transfers/Assumptions:
Permitted with Sierra Capital's approval
Fixed Rate Period Guidelines
Loan Term:
With a 1-year initial Floating-Rate period, Fixed-Rate period may
be 4, 6 or 9 years
With a 2-year initial Floating-Rate period, Fixed-Rate period may
be 5, 8 or 13 years
See chart below
Prepayment Provisions:
Prepayable in full, subject to yield maintenance premium based on the
combined initial Floating-Rate period and Fixed-Rate period
Pricing:
Risk based pricing
Interest Rate locked at Early Rate-Lock application or commitment
Pricing based on the yield on the applicable Treasury security, which
will be similar to the combined initial Floating-Rate period and Fixed-Rate
period (see chart below)
Transfers/Assumptions:
Permitted with Sierra Capital's approval
Final Floating-Rate Period Guidelines
Loan Term:
1 year after Fixed-Rate period
Prepayment Provisions:
Prepayable at par
Pricing:
Spread of 250 basis points over the 1-month Freddie Mac Reference Bill®
index.
Interest-Rate Cap:
Not required
Transfers/Assumptions:
Not permitted
Summary of Float-to-Fixed-to-Float Available
Term Structures
