Groups Seek Big Changes to IO, Option ARM Rule

The proposed regulatory guidance on interest-only and payment option mortgages should be substantially revised or withdrawn, according to America's Community Bankers. "ACB believes that restrictions on the use of these mortgage products are unnecessary for regulated financial institutions," ACB president and chief executive Diane Casey-Landry said in a comment letter.The Consumer Mortgage Coalition also raised objections to the guidance, which requires IO and option ARMs to be underwritten at the fully indexed interest rate, while assuming the fully amortizing payments. "Nontraditional mortgage products should not be singled out as necessarily riskier than other products; they simply present different kinds of risk," CMC executive director Anne Canfield commented. The comment period on the proposed interagency guidance on nontraditional adjustable rate products ends March 29.