Agenda - Council - 12/22/1981 - Laserfiche WebLink

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I I I I I I I I I I I I I I I I Other~qpplications of the CPI Since the mid-1960's, when inflation escalated rapidly, the uses of the index have been expanded. Some examples: · Adjustment of pension benefits, including Social Security, railroad retirement, and Federal retirement benefits · Restatement of corporate earnings in constant dollars under FASB Statement No. 33 · Adjustment of individual income tax brackets and personal exemptions under the new tax law, effective in 1985. Impact of Recomputation A modification of any component of the CPI will, of course, result in an adjustment in the index it- self. The forthcoming change in the housing component will affect virtually all segments of the population directly or indirectly. As the home ownership component comprises 25% of the "market basket" of goods and services used to compute the CPI, the announced change could re- sult in a significant adjustment of the index. The important elements involved in calculating both the CPI for all Urban Consumers (CPI-U) and the CPI for Wage Earners and Clerical Workers (CPI-W) as well as other matters of current interest will be discussed at the conference. Information concerning the meeting, including arrangements for obtaining copies of meeting mate- rials, can be obtained by calling Ms. Andree Audet of the U.S. Chamber at (202) 659-6165. MOST S&Ls TO OFFER ADJUSTABLE-RATE MORTGAGES BY YEAR-END A national survey of savings and loan associations' adjustable mortgages by the American Mortgage Insurance Company indicates that about two-thirds of all S&Lsare likely to be offering adjustable- rate mortgages (ARMs) by the end of 1981..The survey of 400 S&Ls was completed in early September. Recently, the Federal Home Loan Bank Board (FHLBB) authorized S&Ls to offer ARMs but it left many decisions on how to structure the adjustable mortgages up to the S&Ls. Some survey results: · 67% of S&Ls that presently offer ARMs use the national average FHLBB mortgage contract rate as the index for rate adjustments. About 10% use a Treasury bill or note rate, while the remaining use a variety of other indices. · 55% of the 92 S&Ls with assets of $1 billion or more allow negative amorti- zation of the ARMs offered. · 50% of S& Ls offering A R Ms adjust the payments every year and another 28% adjust the payments every 3 years. The adjustment schedules for interest rates are very similar to those for payments. The results of the survey may be useful for S&Ls that are still developing their ARM plans, and for those that have not decided whether to offer these new mortgages.