Banking



BANKING

Several federal agencies issued final illustrations to help lending institutions implement the consumer protection portion of the Interagency Guidance on Nontraditional Mortgage Product Risks those agencies adopted in October 2006.

The guidance issued by the Federal Reserve, FDIC, National Credit Union Administration, Office of the Comptroller of the Currency, and Office of Thrift Supervision outlines recommended practices to give consumers clear and balanced information about nontraditional mortgages before they choose a mortgage product or select a payment option for an existing mortgage. The illustrations include:

Disclosures about interest-only and payment option mortgages.

A chart that compares the required monthly payments of traditional fixed mortgages, five-year interest-only adjustable-rate mortgages (ARMs), and payment option ARMs and their effects on loan balances over the life of the loan.

A table that could be included with any monthly statement for a payment option ARM providing information on the effects of various payment options on the loan balance.

The illustrations are not mandatory. Institutions may choose to use the illustrations, provide information based on the illustrations, or provide consumer information described in the guidance in an alternate format. The full text of the guidance is available at www.fdic.gov/news/news/press/2007/pr07044a.pdf .

The Federal Reserve Board approved a final rule to implement section 601 of the Financial Services Regulatory Relief Act of 2006, which eliminated several reporting and disclosure requirements for insider lending by insured depositary institutions. The Fed proposed eliminating the statutory requirements because federal banking agencies have not found them useful in monitoring insider lending or preventing insider abuse.

Regulation O, which governs insider lending, will continue to require depositary institutions and insiders to maintain sufficient information to enable examiners to monitor compliance with the regulations. Federal banking agencies will retain authority to collect information on insider lending.

The rule, which took effect July 2, is available at http://edocket.access.gpo.gov/2007/pdf/E7-10402.pdf .

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