Who is responsible for determining the index on an Adjustable Rate Mortgage (ARM)?

The lender is responsible for determining the index on an Adjustable Rate Mortgage (ARM). In the context of an ARM, the index is a benchmark interest rate that reflects the overall movement of interest rates in the market. Lenders select a specific index based on various factors, including market conditions, the type of loan, and their lending practices.

Choosing an appropriate index is crucial because it directly impacts the borrower's interest rate adjustments over time. The lender typically informs the borrower about the specific index used in the loan agreement and how it will affect future payments. This decision is part of the lender's role in managing the risks and costs associated with the loan.

The other roles, such as those played by the borrower, real estate agent, and underwriter, do not involve selecting the index. The borrower may express preferences or seek understanding, the real estate agent focuses on property transactions, and the underwriter assesses credit risk and ensures compliance but does not determine the index used for interest rate adjustments.