” ) will affect lenders ’ willingness to originate such loans is still unclear. very few of these higher - priced loans are being originated currently, reflecting the weak mortgage demand and tight underwriting standards that i discussed earlier. the hmda data suggest that only 4 percent of mortgages originated in 2011 carried aprs this high. however, as demand picks up and lending standards ease, the number of potentially higherpriced loans may increase. in 2006 – admittedly, not one of the best years for prudent homeowner dti is measured at the time of the survey, not at the time of loan origination, and may understate the number of affected households if household finances improve after the purchase of a home. a recent study by corelogic suggests that 25 percent of mortgages originated in 2010 had dtis greater than 43 percent. see sam khater ( 2013 ), “ the mortgage market impact of qualified mortgage regulation ( pdf ), ” the marketpulse, vol. 2 ( february ), pp. 3 – 6. bis central bankers ’ speeches mortgage underwriting in this country – about 25 percent of conventional purchase mortgage originations were considered higher priced. 12 lenders who prefer to price for risk through points and fees rather than increases in rates also face constraints in originating qms. points and fees on a qm loan may not exceed 3 percent of the loan amount, with higher caps available for loans smaller than $ 100, 000. the “ points and fees ” definition has been expanded from its original definition in the truth in lending act and now includes, for example, compensation paid to the loan originator in the form of a higher interest rate on the loan. unfortunately, data on points and fees are limited, so it is difficult to determine how many potential borrowers might be affected by this requirement. to be clear, many borrowers were overcharged or defrauded by lenders in the past decade, and these abuses were concentrated among the more vulnerable parts of the population. it is a positive development if new regulations make such abuses more difficult. still, the costs associated with mortgage lending, especially to borrowers more likely to default, have increased, and if lenders cannot charge enough to recoup these costs, they may not be willing to make the loans at all. as a result, the qm - related incentives against charging higher interest rates, points, or fees will likely affect more loans than in the past and may,

liquidity leads also to further expansion of the balance sheet of the federal reserve. to avoid inflation in the long run and to allow short - term interest rates ultimately to return to normal levels, the fed's balance sheet will eventually have to be brought back to a more sustainable level. the fomc will ensure that that is done in a timely way. however, that is an issue for the future ; for now, the goal of policy must be to support financial markets and the economy. finally, working together with the treasury, the fdic, and other agencies, we must take all steps necessary to minimize systemic risk. the capital injections into the banking system under the eesa, the fdic's guarantee program, and the provision of liquidity by the federal reserve have already served to greatly reduce the risk that a systemically important financial institution will fail. we at the federal reserve and our colleagues at other federal agencies will carefully monitor the conditions of all key financial institutions and stand ready to act as needed to preserve their viability in this difficult financial environment. banks have an incentive to borrow from the gses and then redeposit the funds at the federal reserve ; as a result, banks earn a sure profit equal to the difference between the rate they pay the gses and the rate they receive on excess reserves. however, thus far, this type of arbitrage has not been occurring on a sufficient scale, perhaps because banks have not yet fully adjusted their reserve - management practices to take advantage of this opportunity. i have not discussed the international response to the crisis today, but policymakers abroad as well as those in the united states have taken a series of extraordinary steps to address an extraordinary situation. these steps include strong fiscal and monetary actions as well as measures to stabilize key financial institutions and markets and to strengthen the financial infrastructure. i am not suggesting the way forward will be easy. but i believe that the policy responses taken here and by our international partners, together with the underlying vitality and resilience of the american economy, will help to restore confidence to our financial system and place our economy back on the path to vigorous growth.