counselors, community group representatives, and government officials attended. regulatory responses the federal reserve takes responsible lending and consumer protection very seriously. along with other federal and state agencies, we are responding to the subprime problems on a number of fronts. we are committed to preventing problems from recurring, while still preserving responsible subprime lending. last year, in coordination with other federal supervisory agencies, we issued principlesbased guidance describing safety - and - soundness and consumer - protection standards for nontraditional mortgages, such as interest - only and negative - amortization mortgages. we subsequently issued illustrations to help institutions clearly communicate information to consumers. in june of this year the agencies issued supervisory guidance on subprime arms. the guidance describes standards that banks should follow to ensure that borrowers obtain loans that they can afford to repay and that give them the opportunity to refinance without prepayment penalty for a reasonable period before the interest rate resets. we have requested public comment on illustrations to help lenders implement this guidance. the board also is committed to providing more - effective disclosures to help consumers defend against improper lending. as i discussed in my testimony to this committee in july, we recently issued proposed rules under regulation z, which implements the truth in lending act ( tila ), to improve disclosures related to credit cards and other revolving credit accounts. we are now engaged in a similarly rigorous review of tila rules for mortgage loans and will be conducting extensive consumer testing of mortgage disclosures for this purpose. in my view, better disclosure of the schedule of mortgage payments over the life of the loan can help borrowers understand the terms of their mortgages and judge their ability to make future payments. consumers may also benefit from better information about costs, including brokers'fees, when choosing among competing mortgage products. in addition, we " the home ownership preservation initiative in chicago ( hopi ) : reducing foreclosures through strategic partnerships, " presentation by bruce gottschall, executive director, neighborhood housing services of chicago, june 25, 2007, http : / / nw. org / network / neighborworksprogs / foreclosuresolutions / documents / hopi _ 000. ppt. are developing two sets of proposed changes to tila rules – one to address concerns about incomplete or misleading mortgage loan advertisements and solicitations and a second to require lenders to provide mortgage disclosures more quickly so that consumers can get the information they need

when it is most useful to them. improved and more timely disclosures may not be sufficient in some cases. as i discussed in july, we will use our rulemaking authority under the home ownership and equity protection act to propose additional consumer protections later this year. we are looking closely at some mortgage lending practices, including prepayment penalties, escrow accounts for taxes and insurance, stated - income and low - documentation lending, and the evaluation of a borrower's ability to repay. the information that we gathered at a public hearing in june and from the subsequent comment letters has been extremely helpful. the recent problems in subprime lending have underscored the need not only for better disclosure and new rules but also for more - uniform enforcement in the fragmented market structure of brokers and lenders. in that regard, the csbs has partnered with the american association of residential mortgage regulators ( aarmr ) to develop a nationwide licensing system and database for mortgage professionals, and they have made considerable progress. the system is expected to start up in january 2008 with seven states, and another thirty states have committed and will be added gradually. such a nationwide system would help limit the ability of originators who run afoul of their state regulators to continue operating simply by moving to another state. raising the quality of underwriting practices by all lenders to a uniformly high standard is an important objective. to that end, the board and the other federal agencies worked with the csbs to apply the two guidance documents i mentioned – on nontraditional mortgages and subprime arms – to state - supervised institutions. the csbs published nearly identical guidance documents and has urged the states to implement them. many states have done so, or are moving to do so. to achieve strong and uniform enforcement, interagency cooperation among a variety of federal and state agencies is essential. as i noted in my testimony in july, the board has launched a pilot program with the csbs, aarmr, the office of thrift supervision, and the federal trade commission. the goal of this program is to expand and improve consumer protection by strengthening compliance reviews at selected nondepository lenders with significant subprime - mortgage operations. the board will review nonbank subsidiaries of bank holding companies, and the other agencies will conduct similar reviews of nondepository institutions of thrift holding companies, independent mortgage lending companies, and mortgage brokers doing business with these entities. the reviews will include an