A homeowner refinanced his home by taking out an adjustable rate mortgage (ARM). The loan documents contained a disclaimer stating the interest rate and monthly payment on the ARM may increase over the life of the loan, and allow for possible negative amortization. The homeowner made monthly payments on his ARM following the only payment schedule furnished by the lender.  The homeowner eventually discovered the payment schedule increased the principal debt monthly and contributed directly to negative amortization, resulting in a significant loss of equity in his home over time. The homeowner made a demand on the lender for the lost equity in his home caused by the negative amortization, claiming the lender inadequately disclosed the likelihood of negative amortization of principal balance since the loan documents stated negative amortization might occur over the life of the ARM, when the payment schedule guaranteed it would. The lender claimed it adequately described the terms of the ARM and was thus not responsible for the loss of equity in the homeowner’s home since the loan documents signed by the homeowner explained the ARM had the potential to allow for negative amortization. A California court of appeals held the lender was responsible for the homeowner’s loss of equity in his home resulting from the negative amortization of the ARM financing since the loan documents furnished to the homeowner by the lender inadequately disclosed the certainty that negative amortization would occur based on the payment schedule. [Boschma v. Home Loan Center, Inc. (2011) 198 CA4th 230]