the proposed rules exempt securitizations backed entirely by very high - quality mortgages – so - called qualified residential mortgages ( qrms ) – from risk retention. the act directed the regulators with rulemaking authority to define qrms taking into account “ underwriting and product features that historical loan performance data indicate result in a lower risk of default. ” to define qrms, regulators conducted extensive research on the types of mortgages that have low credit risk, even in stressful economic environments. under the proposed definition, a qualified residential mortgage must be a closed - end, first - lien mortgage to purchase or refinance a one - to four - family property. mortgage features cannot include negative amortization, interest - only payments, or the potential for large interest rate increases. debt - to - income ratios must be conservative, and the borrower ’ s credit history must be relatively clean. finally, the maximum loan - to - value ratio is 80 percent for purchase mortgages, with no junior lien at closing ; 75 percent on rate and term refinance loans ; and 70 percent on cash - out refinance loans. we know that some have expressed anxiety that this narrow definition will result in many borrowers paying higher mortgage rates or being excluded from the credit markets. however, with many creditworthy mortgages not qualifying under the qrm standards, deep funding markets for these products are more likely to develop. as a consequence, we expect that the price difference between mortgages that do and do not qualify under the qrm standard will be relatively small. another recently proposed set of rules seeks to ensure that, from now on, all mortgages meet higher underwriting standards, regardless of whether the mortgages are sold into securitizations or retained by lenders on their balance sheets. the qrm standards must also be at least as conservative as these universal higher standards. these revisions to the regulations implementing the truth in lending act are also required by the dodd - frank act. the proposed rules, which were released by the board in april, establish expanded “ ability to repay ” requirements for most consumer credit transactions secured by a dwelling. these rules will be finalized by the consumer financial protection bureau, the new independent agency created by the act. i know that we are approaching the end of this session, and i fear that my recital of the woes of the housing market may have prevented you from fully enjoying your lunch. so let me close with a

to address the outlook for the three categories of business investment : equipment and software, structures, and inventories. forecasting business investment is complicated, however. despite the importance of this subject, the policymakers, academics, and business economists who study it have limited knowledge regarding its behavior and the factors determining that behavior. by highlighting some of the thorny issues that need to be considered, i hope to provide a backdrop to help elucidate the likely performance of business investment in the quarters to come. although forecasting involves considerable uncertainty, i think that the prospects for business investment over the next few quarters are, on balance, relatively positive. i should note, of course, that the comments that i make today reflect only my own views ; they should not be taken to represent the views of my colleagues on the board of governors or in the federal reserve system. equipment and software the largest component of business investment is expenditures on new equipment and software. this category includes computers, routers and switches, machinery, aircraft, trucks, software, and a wide variety of other types of equipment that are used to produce goods and services. decisions of business people regarding equipment and software investment are based on their assessment of business prospects, the nature of the capital goods themselves, and financing conditions. in short, potential purchasers of business equipment will need to assess a plethora of variables that are at best known only imperfectly. for economists who forecast investment, the task is even harder : not only must we form opinions about all these variables, we must try to discern the business community ’ s response to them. currently, demand for business products and services appears to be rising. in addition, interest rates remain low, and the business sector has ample cash on hand. historically, such conditions have been associated with increasing real business spending on equipment and software. at the moment, however, at least four additional factors are clouding our view. first, after the trough of the last recession, businesses seemed more hesitant than usual to expand their productive capabilities. concerns about terrorism, war, and corporate governance scandals may have made it harder for firms to have confidence that a robust and durable recovery was under way. with heightened uncertainty, many firms may have been reluctant to increase capital spending. the issue we face now, nearly three years since the trough, is whether this reluctance has abated. the evidence we have for ongoing business hesitancy is suggestive but far from conclusive. one piece of evidence is found