New Mortgages for Financing Homes Need Uniform and Comprehensive Consumer Safeguards

Highlights

GAO reviewed several of the new mortgage instruments for single-family homes and their impact on homebuyers and lenders. The review was made because many Americans purchasing homes in the future will be faced with selecting one of the new alternative mortgage instruments instead of the standard level payment mortgage which has been in use for about 40 years.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Federal Home Loan Bank Board	The Federal Home Loan Bank Board should determine whether borrowers should be given the option of different note maturity dates than now offered.	Closed GAO has no information on the actions taken in response to this recommendation.
Internal Revenue Service	Federal regulators should study the interest rate cap structures for the various instruments being offered and applicable risks with a view toward establishing standardized interest rate caps that provide mutual and equitable protection to both consumers and lenders.	Closed GAO has no information on the actions taken in response to this recommendation.
Federal Home Loan Bank Board	Federal regulators should study the interest rate cap structures for the various instruments being offered and applicable risks with a view toward establishing standardized interest rate caps that provide mutual and equitable protection to both consumers and lenders.	Closed GAO has no information on the actions taken in response to this recommendation.
Internal Revenue Service	The Comptroller of the Currency and the Chairman of the Federal Home Loan Bank Board should develop and administer uniform consumer safeguards in all adjustable-rate mortgage regulations. These safeguards should: (1) require that homebuyers under all adjustable-rate programs be provided a choice between a standard mortgage and the adjustable-rate mortgage being offered; and (2) provide prospective borrowers full disclosure concerning monthly mortgage payments they potentially face over the life of their mortgage commitment.	Closed GAO has no information on the actions taken in response to this recommendation.
Federal Home Loan Bank Board	The Comptroller of the Currency and the Chairman of the Federal Home Loan Bank Board should develop and administer uniform consumer safeguards in all adjustable-rate mortgage regulations. These safeguards should: (1) require that homebuyers under all adjustable-rate programs be provided a choice between a standard mortgage and the adjustable-rate mortgage being offered; and (2) provide prospective borrowers full disclosure concerning monthly mortgage payments they potentially face over the life of their mortgage commitment.	Closed GAO has no information on the actions taken in response to this recommendation.
Department of Housing and Urban Development	The Secretary of HUD should: (1) provide HUD underwriters with criteria to assess future income of homebuyers applying for a section 245(a) GPM; (2) require that the Government National Mortgage Association work with securities dealers, investors, and issuers to assure partipation of section 245(a) 10-year plans in the mortgage-backed securities program; and (3) assure that homebuyers are apprised of all payment plan options available under the GPM program. One way to do this would be a certification signed by the homebuyers that they were informed of all options available.	Closed GAO has no information on the actions taken in response to this recommendation.

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Financial Markets and Institutions

Consumer protectionHomeowners loansMortgage interest ratesMortgage loansMortgage programsMortgagesInterest ratesMortgage marketReal propertyMortgage payments