concerning mortgage loan advertisements and solicitations. these proposed rules will also address issues relating to the timing of disclosures, to ensure not only that consumers get the information they need, but that they get it when it would be most useful to them. the federal reserve recognizes that disclosures may not be sufficient to protect consumers from harmful mortgage products or terms. therefore, the board plans to exercise its authority under the home ownership and equity protection act ( hoepa ) to address specific practices that are unfair or deceptive. in june, i chaired a daylong public hearing at which we received valuable insight from both industry and consumer groups into the impact of specific mortgage practices on subprime borrowers. some of the practices we are looking at are pre - payment penalties, the waiver of escrow accounts for taxes and insurance, and the proliferation of stated - income or low - documentation loans. concerns have also been expressed about underwriting standards that do not fully take into consideration the borrower ’ s ability to repay. the board is closely examining these issues and discussing possible remedies. we expect to propose rules under hoepa later this year. community affairs and consumer education roles the federal reserve also looks beyond its supervisory and regulatory functions to address concerns of information asymmetries and access to financial services in local markets. a core principle of economics is that markets are more competitive, and therefore more efficient, when accurate information is available to both consumers and suppliers. the federal reserve dedicates considerable resources to community development and consumer education efforts designed to help facilitate the flow of accurate information to communities and consumers, particularly those that have been traditionally underserved. the board, each of the twelve federal reserve banks, and many of the branch offices have a community affairs office ( cao ). these offices work to promote community development and fair and impartial access to credit by focusing on low - and moderate - income consumers. the community affairs function develops programs, partnerships, and initiatives that bring consumers into the financial and economic mainstream and that assist financial institutions in identifying viable opportunities in markets that may be underserved. the caos also engage in research to help improve understanding of how financial services policies and practices affect lower - income households and neighborhoods. in addition, the federal reserve has a robust consumer education program. through our consumer education publications, programs, and partnerships, the federal reserve informs consumers about financial transactions and the regulations that govern those transactions, to help them understand consumer protections and their rights

reserve initiatives to address current issues of concern, with an emphasis on consumer protection. the federal reserve fulfills its consumer protection mandate through four complementary processes. the first process is examining supervised financial institutions for safety and soundness, and for compliance with consumer protection laws and regulations. this includes taking supervisory action as appropriate to enforce the laws and resolve any consumer complaints. the second is rulewriting - - issuing regulations, either separately or jointly with other federal agencies, to implement the consumer financial services and fair lending laws. the third is promoting consumer education through publications and through partnerships with other organizations. and the fourth is promoting community development and fair and impartial access to credit by conducting outreach activities in lower - income communities and traditionally underserved markets. supervisory efforts on subprime mortgage lending with respect to supervision, the federal reserve exercises its examination and enforcement authority to monitor and address issues of concern at the banks it oversees. in addition, we often issue guidance to provide the industry with supervisory “ best practices ” for addressing safety and soundness and consumer protection matters. guidance is generally a moreresponsive supervisory tool than rules, and it allows institutions more flexibility in adopting new business practices. over the years, the federal reserve, in concert with other supervisory agencies, has issued a series of supervisory guidance documents to address subprime and nontraditional mortgage lending issues. the guidance has underscored the importance of a well - structured risk - management program for subprime lenders and has stressed that lending standards should include well - defined underwriting parameters, such as acceptable loan - to - value ratios and debt - to - income ratios, and minimum acceptable credit scores. guidance has also been used to address common predatory and abusive lending practices, including making unaffordable loans, inducing a borrower to refinance a loan repeatedly to generate fee income, and engaging in fraud or deception to conceal the true nature of the loan obligation. most recently, supervisory guidance has emphasized the added dimension of risk when higher - risk loans are combined with other features - - such as the use of simultaneous second lien loans in lieu of a down payment or the use of underwriting that involves little or no documentation of income or assets. guidance has also underscored the safety and soundness and consumer protection concerns prompted by other underwriting practices often seen in subprime and nontraditional mortgage lending, such as excluding taxes and insurance in the underwriting process and allowing deferred repayment of principal by offering