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Federal financial regulators issued a final Statement on Subprime Mortgage Lending, which addresses concerns about adjustable-rate mortgages (ARMs) and the payment shock they can carry. The statement was issued by the Federal Reserve Board, FDIC, Office of Thrift Supervision, Office of the Comptroller of the Currency, and the National Credit Union Administration.

The statement describes prudent safety, soundness and consumer protection standards that lending institutions should follow to ensure borrowers obtain loans they can afford to repay.

The standards also restrict situations in which lenders may accept less documentation of borrowers’ income. The standards also require clear disclosures and impose limits on prepayment penalties.

The interagency statement is available at

In a bid to help customers make informed decisions when shopping for home loans, the Federal Reserve Board has established an online Mortgage Comparison Calculator. The tool allows consumers to compare mortgage payments and rate of equity accumulation for up to six types of fixed and adjustable-rate mortgages.

Based on information provided by the user, the calculator determines loan balances in future years, home equity in future years, initial monthly payment, future monthly payments with no interest rate change, and future monthly payments with an interest rate change. The calculator is available at

An FDIC report says offering Individual Development Accounts (IDAs) is a promising way to attract banking business from low- and moderate-income households. IDAs are matched savings accounts that help a household save toward a particular goal such as a home purchase, college education or a small business expansion.

The FDIC estimates that 10 million American households of low or moderate incomes hold assets and conduct regular financial transactions with nonbank financial companies. Many of these people make little or no use of banking services. The volume of nonbank financial transactions is estimated to be as much as $250 billion.

Approximately 244 FDIC-insured institutions participate in IDA programs. Among other benefits, participating institutions receive positive consideration during Community Reinvestment Act examinations.

The report is available in the publication FDIC Quarterly at

Reported Uses of Individual
Development Account Funds

Home purchase. . . . . . . . . . . . . . .28%
Microenterprise. . . . . . . . . . . . . . .23%
Post-secondary education. . . . . . . 21%
Home repair. . . . . . . . . . . . . . . . . 18%
Retirement. . . . . . . . . . . . . . . . . . . .7%
Job training. . . . . . . . . . . . . . . . . . . 2%

Source: Final Report: Saving Performance in the American Dream Demonstration, by Mark Schreiner, et al., 2002,




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