Senate Passes ARM Amendmentby Tim Manni
The Senate unanimously passed an amendment regarding Adjustable Rate Mortgages (ARMs) to the ongoing housing rescue bill last week. Senator Christopher S. Bond’s (R-Mo.) amendment requires lenders and brokers to provide clearer information to consumers regarding ARMs with “teaser” rates. Senator Bond explained ARMs with teaser rates “played a large role in our current subprime mortgage crisis.”
The amendment requires that both lenders and brokers properly explain how high the borrower’s payments might rise after the initial fixed rate expires. Additionally, lenders and brokers must also stress that there is no guarantee they will be able to refinance before the lower, initial rate expires. Senator Bond said many borrowers were unaware of the loans’ specifications, and were falsely assured they would be able to refinance.