The Alternative Mortgage Transaction Parity Act of 1982, Title VIII of the Garn-St. Germain Depository Institutions Act of 1982, aimed to ensure "alternative mortgage transactions" (interest-only, balloon-payment and adjustable-rate) by allowing more mortgage lenders to offer them. These alternative mortgage transactions were deemed essential to providing adequate credit for the anticipated mortgage demands of the 1980s, given the high interest rates at the time.
Introduced by Rep. St. Germain
The Garn-St. Germain Depository Institutions Act of 1982, HR 6267, was introduced May 4, 1982 by Rep. Fernand J. St. Germain and attracted 28 co-sponsors. It passed the House by a 272 to 91 vote on May 20, 1982 and the Senate by a voice vote on Sept. 24, 1982. President Ronald Reagan signed the bill into law on Oct. 15, 1982.
Provided Parity
The law provided parity between federally-chartered mortgage lenders and their nonchartered counterparts by allowing both to sell, buy and enforce alternative mortgages that otherwise met federal regulations. This need for parity among lenders was recognized by the Comptroller of the Currency, Director of the Office of Thrift Supervision and National Credit Union Administration.
Definitions
The act defined an "alternative mortgage transaction" as a loan for a residence (including a manufactured home or residential housing cooperative organization) that features: a renegotiated or adjusted interest rate or other finance charge; a fixed interest rate that can increase by having the mortgage mature early; or other nontraditional fixed-rate, fixed-term mortgages such as sharing appreciation or equity.
"Housing creditors" were defined as "depository institutions" (ones that get their funds primarily from deposits), lenders approved for the National Housing Act or any person who regularly loans money secured by property.
Applicability
The law applied to bank transactions covered by the Comptroller of the Currency regulations, credit union transactions covered by the National Credit Union Administration, and savings and loan associations, mutual savings banks and savings banks transactions covered by the Director of the Office of Thrift Supervision. It also superseded state regulations, laws or constitutions.
Blamed For 2007 Real Estate Market Collapse
The expanded access to "alternative mortgages," also sometimes derisively labeled "subprime," provided by the Alternative Mortgage Transactions Parity Act of 1982 was cited by some as a major cause of the 2007-2008 real estate market collapse.
University of Connecticut law professor Patricia McCoy was quoted in a January 2008 "Fortune" magazine article as saying no other regulations were enacted to prevent these new "alternative mortgages" from becoming exploitative. Congress, maybe not in the 1980s but certainly in the 1990s, should have required the underwriting on the new mortgages be applied to the maximum interest rate and not the initial "teaser" rate, she said.
Tags: Alternative Mortgage, alternative mortgages, interest rate, transactions covered, alternative mortgage, alternative mortgage transactions, Comptroller Currency