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All eyes on ARMs.(adjustable-rate mortgages)(Brief Article)
KiplingerForecasts, December, 2005
By early 2006, federal officials will step up scrutiny of lenders making interest-only adjustable-rate mortgages (ARMs) and option ARMs. Both types of loans rely on payments that are held artificially low for several years, then jump markedly higher. Federal banking regulators at the Office of the Comptroller of the Currency, Federal Reserve and elsewhere are worried that borrowers may not be able to handle the higher payments when interest rates rise. If that were to happen on a broad scale, it could damage U.S. economic growth.
Regulators will spell out what lenders should considerwhen assessing loan applicants' financial health. And the feds will make clear that lenders must make sure borrowers are fully aware of the risks involved in such exotic loan...
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