Guaranty Mortgage

Eighty Plus consumer advocacy groups are pushing federal regulators to reclassify adjustable-rate-mortgages or ARMS  in the subprime market as “non-traditional” loans. The change would require lenders, who are issuing “exploding” adjustable-rate-mortgages (or 2/28 and 3/27 loan types), to use stricter guidelines when underwriting the products in the subprime market.

The Center for Responsible Lending, one of the group’s leading the charge, says “exploding” ARMs, which begin with teaser fixed-rates and explode into much larger mortgage payments, should have been included in a previous government edict that required lenders to underwrite high-risk loans at the fully-indexed rate.

“It’s like Washington has set out to repair a dangerous street, but they left a gaping hole where some of the traffic goes,”said Martin Eakes, CEO of the Center for Responsible Lending. “If regulators act now to provide explicit protections for these dangerous ARMs, we can slow down the flood of foreclosures on subprime loans and help ensure that homeowners get home loans they can sustain.”

Reclassification of ARMs in the subprime market also got agreement from  AARP, the Leadership Conference on Civil Rights, the AFL-CIO, ACORN, Rainbow/Push, NAACP, Consumers Union, and the Consumer Federation of America.   

Eighty Plus consumer advocacy groups are pushing federal regulators to reclassify adjustable-rate-mortgages or ARMS  in the subprime market as “non-traditional” loans. The change would require lenders, who are issuing “exploding” adjustable-rate-mortgages (or 2/28 and 3/27 loan types), to use stricter guidelines when underwriting the products in the subprime market.

The Center for Responsible Lending, one of the group’s leading the charge, says “exploding” ARMs, which begin with teaser fixed-rates and explode into much larger mortgage payments, should have been included in a previous government edict that required lenders to underwrite high-risk loans at the fully-indexed rate.

“It’s like Washington has set out to repair a dangerous street, but they left a gaping hole where some of the traffic goes,”said Martin Eakes, CEO of the Center for Responsible Lending. “If regulators act now to provide explicit protections for these dangerous ARMs, we can slow down the flood of foreclosures on subprime loans and help ensure that homeowners get home loans they can sustain.”

Reclassification of ARMs in the subprime market also got agreement from  AARP, the Leadership Conference on Civil Rights, the AFL-CIO, ACORN, Rainbow/Push, NAACP, Consumers Union, and the Consumer Federation of America.