November 22, 2005
Fed Eyes New Rules to Avoid Mortgage Shocks
Federal Reserve Board staff are eyeing ways to improve the disclosures on new adjustable-rate mortgage (ARM) products so that consumers are better informed about the payment shocks associated with interest-only and option ARMs.
Fed counsel Kathleen Ryan told a Mortgage Bankers Association's compliance conference recently that the Fed's consumer and community affairs staff are not sure the current Truth in Lending Act (TILA) disclosures are doing an adequate job.
"Staff is wrestling with better ways to disclose payment shock," she said, particularly when there is a cap on negative amortization.
She indicated that the staff might seek approval later this year to start a project that updates the ARM disclosures, which means lenders probably won't see any significant changes to the TILA disclosure for another 18 to 24 months.
Separately, the proliferation of interest-only and option ARMs has prompted federal banking regulators to draft guidance on sound underwriting and risk management practices.
An interagency task force, led by the Office of the Comptroller of the Currency, had been working on guidance all summer. OCC assistant director Steven Van Metter told the MBA conference that issuance of the guidance may be six weeks away. But he said that estimate might be "optimistic."
Source: Origination News
Fed counsel Kathleen Ryan told a Mortgage Bankers Association's compliance conference recently that the Fed's consumer and community affairs staff are not sure the current Truth in Lending Act (TILA) disclosures are doing an adequate job.
"Staff is wrestling with better ways to disclose payment shock," she said, particularly when there is a cap on negative amortization.
She indicated that the staff might seek approval later this year to start a project that updates the ARM disclosures, which means lenders probably won't see any significant changes to the TILA disclosure for another 18 to 24 months.
Separately, the proliferation of interest-only and option ARMs has prompted federal banking regulators to draft guidance on sound underwriting and risk management practices.
An interagency task force, led by the Office of the Comptroller of the Currency, had been working on guidance all summer. OCC assistant director Steven Van Metter told the MBA conference that issuance of the guidance may be six weeks away. But he said that estimate might be "optimistic."
Source: Origination News
# posted by Sponduliqs @ 9:07 AM 
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