What type of mortgages does the initial rate adjustment notice apply to?

The initial rate adjustment notice specifically applies to Adjustable Rate Mortgages (ARMs) with terms longer than one year. This type of mortgage has an interest rate that can fluctuate based on market conditions, which means borrowers often encounter changes in their monthly payments after a predetermined initial fixed-rate period ends. The initial rate adjustment notice serves to inform borrowers about when and how much their interest rate—and consequently their payment—will change, ensuring that they are aware of potential increased financial obligations in the future.

Fixed-rate mortgages offer stable payments throughout the life of the loan, so they do not require an adjustment notice. Other options like Home Equity Lines of Credit (HELOCs) and reverse mortgages have different structures and regulations regarding disclosures and adjustments, making them ineligible for this specific notice. Thus, the correct answer accurately highlights the necessity of this notice for ARMs with terms exceeding one year, as they are the only loans subjected to the initial rate adjustments mentioned.