Fed to make loan docs more transparent

Though recent changes have helped make loan documents more understandable for borrowers, some people with more complicated mortgages are still struggling to grasp the terms, and the Federal Reserve is now addressing that issue. As of Jan. 30, lenders will be required to provide more detailed, easier-to-read disclosures of the interest rates and monthly payments associated with all mortgages, most significantly adjustable-rate mortgages, or ARMs, the New York Times reported. The Fed guidelines also apply to other types of variable mortgages, including negative-amortization loans, interest-only loans and introductory loans, among others. “All of these loans are really complex for the consumer,” said Thomas Martin, the president of America’s Watchdog, a consumer advocacy group. He said that many variable loans covered under the guidelines were at the center of the subprime meltdown and appear to be making a comeback. Terry Francisco, a spokesperson for Bank of America, said the bank was “fully prepared to implement these new documents.” However, he also expressed concern that borrowers might be “further confused” by the guidelines, since “they’re going to be awash in spreadsheets.” [NYT]