Federal regulatory agencies released illustrations this week to help mortgage consumers better understand the differences between alternative loans and fixed-rate mortgage products.
“The Federal Reserve System”:http://www.federalreserve.gov/, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of Currency, and the Office of Thrift Supervision spearheaded the creation of the illustrations to help lending institutions “implement the consumer protection portion of the Interagency Guidance on Nontraditional Mortgage Product Risks” adopted in 2006. The guidance was created last year to give consumers access to detailed information when weighing the pros and cons of choosing alternative loans.

In a joint press release, the regulatory agencies said the illustrations provide consumers with “a narrative explanation of nontraditional mortgage products, a chart comparing interest-only and payment option adjustable-rate mortgages (ARMs) to a traditional fixed-rate loan, and a table that could be included with monthly statements for a payment option ARM showing the impact of various payment options on the loan balance.”
Lenders and financial institutions are not required to implement the illustrations during the sales process.
Click here to access more information about the illustrations online.