Family Economics Review [1982, Number 4]

              Family
Economics
Review
Editors
Kathleen K. Scholl
Katherine S. Tippett
Managing Editor
Sherry Lowe
Editorial Assistant
Nancy J. Bailey
Family Economics Review is published each
quarter by the Family Economics Research
Group, Agricultural Research Service,
United States Department of Agriculture,
Washington, D.C.
The Secretary of Agriculture has
determined that the publication of this
periodical is necessary in the transaction
of the public business required by law of
this Department. Use of funds for this
periodical has been approved by the
Director of the Office of Management and
Budget through March 31, 1987.
Contents may be reprinted without
permission, but credit to Family Economics
Review would be appreciated.
Use of commercial or trade names does not
imply approval or constitute endorsement
by USDA.
Suggestions or comments concerning this
publication should be addressed to:
Kathleen K. Scholl, Editor, Family
Economics Review, Family Economics
Research Group, USDA/ ARS, Federal
Building, Room 442A, Hyattsville, Md.
20782.
For sale by the Superintendent of
Documents, U.S. Government Printing
Office, Washington, D.C. (See p. 38 for
subscription information.)
Family Ec ono mic s Rev i ew 1982 No.4
For sale by the Superintendent or Documents, U.S. Governm•nt Printing Office Washington, D.C. 20402
Famlly
Economics
Review
Contents
New Look for Family Economics Review ••••••••••••••••••••••••••••••••••••••••••••
Alternative Mortgage Instruments ••••••••••••••••••••••••••••••••••••••••••••••••••
Carolyn Summers Edwards
Home Sewing Trends
Joan C. Courtless
..............................................................
Economic Well-Being of the Elderly:
White House Conference on Aging
Joyce M. Pitts
Recommendations From the ...............................................
Household Size and Prices Paid for Food •••••••••••••••••••••••••••••••••••••••••••
Laurence J. Ritzmann
Abstracts
Family Food Budgeting ••• For Good Meals and Good Nutrition •••••••••••••••••••••••
Final Report on Urban Family Budgets •••••••••••••••••••••••••••••••••••••••••••••
LAB STAT Data File Available ••.••••.••••••••. •• •• • • • • • • • • • • • • • •• · • • •• • • • • • •• • •• • ••
Regular Features
Some New USDA Publications .•.••..•.•••....... • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Current Research Projects ............. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Updated Estimates of the Cost of Raising a Child •••••• • •••••••• • • • •••••••• • • • • • •••
Cost of Food at Home •••••••••••••••••• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Consumer Prices .........•............ • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Agricultural Outlook '83 Program--Outlook for Families ••••••••• • • •••••••••••••••••
Issued October 1982
1
1
19
23
27
22
32
33
31
33
35
37
38
40
1982 No.4 family Economics Review
New Look for Family Economics Review
The new look of Family Economics Review is the result of a change in camera copy
preparation. We have kept in mind the numerous photocopies that are made of our
materials and have changed to white paper for the text portion of the publication.
The issues will be numbered, starting the year with No. 1, which will correspond to
previous issues labeled "Winter." We plan to have the issues off press in January
(No. 1), April (No. 2), July (No. 3), and October (No. 4). The most recent information
available at publishing time will be used for the "Cost of Food at Home" and "Consumer
Prices." The "Cost of Raising a Child" will be included in issues No. 2 and 4, and re­gional
costs for food will appear in issue No. 3. The "Index of Articles" for the previous
year will be included in issue No. 1.
Family Economics Review becomes a sale publication with this issue, 1982 No. 4. The
Family Economics Research Group will no longer maintain free general circulation;
readers wishing to subscribe may use the form on page 38. (Extension personnel will not
need to subscribe individually. State Extension Services purchase Family Economics Review
for distribution to staff.)
Single copies of future issues may be requested by writing to Superintendent of
Documents, U.S. Government Printing Office, Washington, D.C. 20402. Requests for
prior issues should be addressed to the Family Economics Research Group, 442A Federal
Building, Hyattsville, Maryland 20782.
Alternative Mortgage
Instruments
By Carolyn Summers Edwards
Economist
Many changes have occurred since new
mortgage designs were first discussed in the
fall 1978 issue of Family Economics Review •1
A variety of alternative mortgage instru­ments,
generally referred to as AMI's, have
been authorized, developed, and subsequently
refined. Some have been designed to ease the
burden of initial monthly payments and
thereby qualify more households for home­ownership;
others have been designed to
shift the risk of interest rate increases
from lenders to borrowers and thereby
encourage more lenders to provide mortgage
loan funds. Despite the resistance and de­bate
surrounding these mortgages, inflation,
1 "New Mortgage Designs," by Carolyn S.
Edwards, pp. 8-16.
family Economics Review 1982 No.4
accompanied by high and volatile interest
rates, has accelerated their acceptance.
Persistent inflation and record high
interest rates also have increased dramati­cally
the cost of constructing and financing
housing. As a result, the rate of new hous­ing
starts has been slowed and many families
have been priced out of the housing market
(_~Q). Many other families have deferred
their first-time purchase of housing. This
deferred demand, coupled with that generated
by newly formed "baby boom" households,
suggests that the eighties will be a period
of unprecedented housing demand.
To meet this demand, the supply of housing
as well as housing finance will need to be
increased. In a period of broad deregulation
of the Nation's depository institutions,
mortgage lenders have argued that this
increase in supply of housing and housing
finance can be met only by providing even
greater flexibility in the design of the
mortgage instrument (_l, l:Q.).
It is not surprising, then, that once
again there is substantial interest and
activity in developing and using AMI's and,
also once again, controversy surrounding
recent regulatory changes (7, 24). AMI's
already in use have been m;-dified with
dramatically lessened restrictions; addi­tional
instruments have been authorized·
still others, once considered unfeasible,'
have been pr<?posed or are receiving
increased attention.
This article reviews the major develop­ments
in several of the mortgage designs
discussed earlier, summarizes the recent
comprehensive adjustable mortgage regula­tions,
and introduces several additional
mortgage instruments. 2 The instrument-by­instrument
descriptions that follow (see
list below) focus on AMI's as defined by
Federal regulations and are generally in the
order that the AMI's were authorized.
Lenders under State, rather than Federal,
regulation may offer variations on the AMI's
discussed here. Readers will want to become
familiar with their particular State laws
and regulations that determine specific
characteristics of these other AMI's.
GPM
RAM
VRM
RRM
AML
ARM
GPAML
Balloon
SAM
PLAM
GEM
Graduated Payment Mortgage
Reverse-Annuity Mortgage
Variable Rate Mortgage
Renegotiable Rate Mortgage
Adjustable Mortgage Loan
Adjustable Rate Mortgage
Graduated Payment Adjustable
Mortgage Loan
Balloon Payment Mortgage
Loan
Shared Appreciation Mortgage
Price Level Adjusted Mortgage
Growing Equity Mortgage
2"Creative financing" techniques, such as
builder buydowns, wraparounds, and
seller-held seconds, which usually involve
preservation of existing loans and/or
seller-backed financing, are not discussed
in this article.
THE FIRST AMI'S:
INSTRUMENT-SPECIFIC REGULATIONS
Early movement away from exclusive use of
the traditional, fixed-rate, level- payment
mortgage brought the development of instru­ment-
specific regulations for AMI's. These
first rules at the Federal level detailed
the exact terms and restrictions for each
type of AMI. All AMI's that were written by
savings and loan associations (S &L's) or
mutual savings banks3 under the jurisdiction
of the Federal Home Loan Bank Board
(FHLBB) or that were insured by the Federal
Housing Administration (FHA) of the U.S.
Department of Housing and Urban Develop­ment
(HUD) were required to meet these
specifications.
GPM: Graduated Payment Mortgage
The GPM (16, 22), which features reduced
initial monthly payments, has been the
primary tool for easing the difficulty many
first-time buyers have in qualifying for a
mortgage. Most GPM's are insured by HUD I
FHA under the Section 245 program. GPM's
are also authorized by the FHLBB indepen­dent
of the HUD/FHA program. Finally, the
Veterans' Administration has recently added
GPM's to its mortgage guarantee program.
HUD/FHA Section 245 GPM's. The Section
245 GPM program began on an experimental
basis in 1974 and was made permanent in
1977. It has expanded substantially since
then, aided by lessening restrictions on
loan-to-value ratios, exemptions from State
prohibitions of negative amortization, 4 and
increased allowable loan sizes. The develop­ment
of a secondary market for GPM's, as
3S &L's and mutual savings banks are also
referred to as thrifts.
4Negative amortization occurs when monthly
payments are insufficient to cover the
interest on the loan. The unpaid interest is
added to the principal owed. The debt thus
increases as interest on the unpaid interest
is added to the amount to be repaid.
1982 No.4 Family Economics Review 2
well as additional lessening of restrictions
on maximum loan sizes (in the Housing and
Community Development Amendments of 1979,
signed into law in January 1980), further
aided the expansion of the Section 245 GPM
program. The Section 245(b) program was
added to the existing Section 245 program on
an experimental basis by the 1979 amendments
to broaden the availability of GPM's for
low- to moderate-income borrowers. The
Section 245(b) program increased allowable
loan sizes and lowered required downpayments
for a limited number of qualified buyers who
had not owned a home in the preceding
3 years. In 1980, nearly a third of all
HUD/FHA single family insured mortgages
were Section 245 GPM's; about three-fourths
of these were written by mortgage
companies (22).
The GPM has helped households that other­wise
could not handle the higher monthly
payments of a Standard Fixed Payment Mort­gage
(SFPM) to be able to qualify for a
mortgage. It also has made the initial years
of purchase easier for those who otherwise
would have borrowed under the HUD /FHA
Section 203(b) insurance program for SFPM's.
Section 245 borrowers, particularly those
purchasing new homes, have lower incomes
than borrowers with SFPM's insured under
Section 203 (b). On the average, GPM borrow­ers,
particularly those buying existing
homes, purchase more expensive homes with
larger downpayments and larger mortgages.
The burden of the payments of these larger
loans on income, however, is offset by the
lowered monthly payments in the first years
of the GPM (22).
The Sectio~245 program authorizes five
GPM's that vary the length of the graduation
period and the annual percentage increase in
the payments. 5 Table 1 compares the minimum
5The Section 245(b) program is restricted
to two rather than five plans.
J family Economics Review 1982 No.4
required downpayment, the amount thus fi­nanced,
the monthly payments, and the total
interest paid on the purchase of a $65,000
house with a Section 203(b) SFPM and the
five Section 245 GPM plans. Plan 3, which
has a 5-year, 7. 5-percent graduation period
and requires nearly the largest downpayment,
accounted for 86 percent of all Section 245
GPM's insured in 1980 (22).
FHLBB GPM's. In January 1979, the FHLl3B
authorized thrifts under its jurisdiction to
offer GPM's with negative amortization.
Prior to that time, federally regulated
thrifts could offer only the HUD /FHA Section
245 GPM or variants (such as the Pledged
Account Mortgage, the Flexible Loan Insur­ance
Program, or the Flexible Payment Mort­gage)
that provide reduced initial monthly
payments without negative amortization.
Under the 1979 FHLBB GPM regulation, pay­ments
could be increased on an annual basis
during the graduation period by an amount
ranging from 3 percent during a maximum
10-year graduation period to 7. 5 percent
during a 5-year graduation period. The
borrower had the option to convert to an
SFPM at any time during the graduation
period. In July 1981, the FHLBB amended its
1979 GPM regulation to make it more consis­tent
with other regulations effective in
1981 (_~) (see discussion on AML's and
GPAML's starting on pp. 6 and 11). Although
the limitation on the length of the gradua-tion
period of 10 years was not changed, the
limitation on the amount by which payments
could increase was deleted. Rather than
holding these increases to once a year, the
1981 regulation increased the frequency to
as often as once a month. The requirement
that the borrower have the option of
converting to an SFPM was also dropped.
VA GPM's. Effective October 17, 1981,
the Veterans' Administration (VA) was
authorized to add GPM's to its mortgage
guarantee program. Unlike other V A-backed
mortgages, VA GPM's require downpayments.
The VA offers two plans designed to prevent
the increase in the outstanding balance
caused by the negative amortization feature
from exceeding the V A's estimate of the
property's reasonable value. VA GPM's
feature 5-year, 7. 5-percent graduation
periods.
.....
\0
CD
N
z
0
~
...,
I".D.' . .­'<
1""1
I')
0
::1
0
"..'. I')
ID ..,
Ill
<... Ill ..
•
Table 1. Comparison of selected features of HUDIFHA Section 203(b) Standard FU:ed-Payment Mortgage
and 5 Section 245 Graduated Payment Mortgagei
Feature Section Section 245
203(b)
Plan 1 Plan 2 Plan 3 Plan 4 Plan 5
Graduation period:
Number of years payments
increase ••••••••••••••••••••••• -- 5 5 5 10 10
Percent increase per year ....... -- 2.5 5 7.5 2 3
Sales price ....•.......•........... $65,000.00 $65,000.00 $65,000.00 $65,000.00 $65,000.00 $65,000.00
Minimum down payment •••••••••••••• 2,900.00 4,050.00 6,500.00 8,700.00 6,450.00 9,250.00
Amount financed2 ••••••••••••••••••• 64,150.00 63,000.00 60,550.00 58,350.00 60,600.00 57,800.00
Size of monthly payments3
made in year--
1 ••.••...••••••••••••.••••.•••••• 958.08 879.28 792.48 717.02 838.79 771.86
2 •••••••••••••••••••••••••••••••• 958.08 898.52 826.66 762.65 853.50 791.94
3 •••••••••••••••••••••••••••••••• 958.08 918.17 862.42 811.52 868.48 812.59
4 •••.••.••.•••••.••••••••.••••••• 958.08 938.23 899.83 863.86 883.72 833.81
5 •••••••••••••••••••••••••••••••• 958.08 958.72 938.95 919.88 899.23 855.61
6 •••••••••••••••••••••••••••••••• 958.08 979.61 979.84 979.82 915.00 878.01
7 •••••••••••••••••••••••••••••••• 958.08 979.61 979.84 979.82 931.04 901.00
8 ••••.••••••••.•••.•••••••••••••• 958.08 979.61 979.84 979.82 947.33 924.60
9 •••••••••••••••••••••••••••••••• 958.08 979.61 979.84 979.82 963.87 948.81
10 ••••••••••••••••••••••••••••••• 958.08 979.61 979.84 979.82 980.66 973.63
11 to 30 ••••••••••••••••••••••••• 958.08 979.61 979.84 979.82 997.69 999.06
Total interest ....•................. 237,116.00 242,254.68 241,524.04 240,797.16 244,176.12 242,671.24
Interest per dollar borrowed ••••••• 3.70 3.85 3.99 4.13 4.03 4.20
1 Calculated on purchase of $65,000 house in Howard County, Md., assuming $900 annual real estate taxes and
HUD/FHA maximum allowable interest rate of 15.5 percent plus 0. 5 percent for FHA insurance •
2Jncludes $2,050 in HUD/FHA allowable closing costs.
3Includes principal, interest, real estate taxes, hazard insurance, and FHA insurance.
RAM: Reverse-Annuity Mortgage
RAM's CQ, 1!.) are designed to provide
elderly homeowners an opportunity to benefit
from the equity they have built up in their
homes and thus allow some to remain in homes
they otherwise could not afford. Under these
instruments, a lender provides periodic
payments to a homeowner or purchases an
annuity for the homeowner based on the
accumulated equity in the property. The
outstanding principal balance of the loan
and the accumulated interest become due at
maturity of the loan, upon the sale of the
property, or upon the death of the home­owner,
whichever occurs first.
RAM's were first authorized for Federal
thrifts in January 1979. At that time,
lenders were given authority to design RAM's
individually, but they were required to sub­mit
each of their proposals to the FHLBB for
review. Lenders were also required to guar­antee
refinancing at maturity and to dis­close
details of the instruments designed.
Only a few lenders have offered RAM's and
those who have offered them have written
only a limited number of these mortgage
instruments. To improve the marketability
and, hence, availability of these loans, the
FHLBB authorized deleting the review and re­financing
requirements in October 1981 (6).
In addition, to make the RAM regulations
consistent with other new regulations (see
discussion of AML's and GPAML's starting on
PP• 6 and 11), the FHLBB authorized adjust­ing
the interest rates on these loans.
VRM: Variable Rate Mortgage and
RRM: Renegotiable Rate Mortgage
The VRM and the RRM (1, 9, 17) were the
first residential mortgage i~struments with
interest rates that could be changed during
the course of the loan and thereby shift the
risk of interest rate increases to borrow­ers.
Under a VRM, payments are adjusted
periodically to reflect changes in the
interest rate. Under an RRM, payments are
adjusted to reflect changing rates, but at
predetermined renegotiation dates that are
less frequent than under the VRM.
VRM's have been the only type of mortgage
available to British borrowers since the
thirties. They were first offered in the
United States in the midseventies by State­regulated
lenders in California and New
5 Family Economics Review 1982 No.4
England (_!1). They became the only instru­ment
offered by some large California lend­ers
during the last half of the seventies,
and, by the end of the decade, various ver­sions
had been approved by about 20 other
States. The FHLBB granted VRM authority in
January 1979, at the same time that GPM's
and RAM's were authorized. This initial au­thority,
however, was restricted to lenders
in California, where VRM's were determined
necessary to maintain a competitive balance
between State-regulated and federally regu­lated
lenders. This need was to be evaluated
on a case-by-case basis for Federal thrifts
in other States. Nationwide VRM authority
was subsequently granted in July 1979.
The FHLBB authorized the RRM as an auto­matically
renewable short-term note secured
by a long-term mortgage in April 1980. Prior
to this approval, various versions of RRM's
and a similar instrument, the rollover, 6 had
been offered by State-regulated lenders (in
Ohio and Wisconsin in particular) for
several years (17). The RRM authorized for
Federal thrifts differed from many of these
other instruments in that it was a true
long-term mortgage with guaranteed refinanc­ing;
there were limits on the interest rate
increases; and its rate was determined with
reference to a specific index. Compared with
the VRM rule, the RRM regulation made the
mortgage instrument more like a short-term
asset for lenders. Although restrictions and
consumer safeguards were lessened, the RRM
provided borrowers a greater margin of cer­tainty.
The magnitude of payment adjustments
was greater, but such adjustments were less
frequent and at predictable dates known fur­ther
in advance. Payments, therefore, were
held stable for longer periods. In contrast
to the index used for VRM's, which was
based on lenders' costs of funds, the RRM
index, based on market conditions, was more
likely to move down as well as up and was
not directly affected by deposit rate
ceilings (_!_, .. V.
6 ..
The rollover has been prevalent in Canada
since the sixties and is often referred to
as the "Canadian rollover."
Because the actual payment schedule and
total interest charges are unknown at the
time of VRM and RRM loan origination, a
great deal of controversy surrounded their
introduction. The regulations for these
instruments, summarized in table 2, included
numerous restrictions and safeguards to
protect borrowers from excessive payment
changes and to insure free, informed choice
(!). Despite the controversy, VRM's and
RRM's were adopted quickly. By December
1980, 5.6 percent of all conventional loans
for one-to-four family units held by thrifts
nationwide were VRM's, and 1.4 percent were
RRM's. In the San Francisco FHLB district,
21.2 percent were VRM's (l). In a March 1981
survey of lenders offering commitments to
make conventional one-to-four family home
mortgages, 43 percent of reporting Federal
thrifts were making commitments for RRM's
only, 32 percent for RRM's and SFPM's, and
only 20 percent for SFPM's only (3). 7
Borrowers, particularly those anticipating
selling in a short period, often favored
VRM's and RRM's because of the lower initial
interest rates and additional benefits, such
as liberal prepayment and assumability pro­visions,
that were often offered as incen­tives
to increase VRM and RRM availability.
RECENT AMI REGULATIONS: GUIDELINES
FOR MORTGAGE LOAN DESIGN
The most dramatic change in mortgage
instrument design began in early 1981 when
new, more liberal regulations for adjustable
rate instruments were released. Unlike the
previous instrument-specific regulations
that detailed the exact terms and restric­tions
for each AMI, the new rules provide
lenders broad guidelines under which a wide
variety of instruments may be designed.
AML: Adjustable Mortgage Loan and
ARM: Adjustable Rate Mortgage
The first of the new AMI regulations was
issued by the Office of the Comptroller of
the Currency (CO C), regulator of the nation­al
banks, for the Adjustable Rate Mortgage
7The survey included large thrifts insured
by the Federal Savings and Loan Insurance
Corporation (FSLIC) that were located in
each of the 12 FHLB districts.
(ARM), effective March 27, 1981 (~). The
FHLBB followed with its comparable Adjust­able
Mortgage Loan (AML) rule, effective
April 30, 1981, which replaced the earlier
VRM and RRM rules (1). 8 Finally, the Nation­al
Credit Union Administration authorized
ARM's effective July 22, 1981 (~). The
major characteristics of the FHLBB's AML and
the COG's ARM regulations are summarized in
table 3. These regulations contrast dramati­cally
with the first Federal regulations for
adjustable mortgages (table 2) that had been
so controversial less than 2 years earlier.
Under the FHLBB's AML rule, interest rate
changes may be implemented through any com­bination
of changes in the payment amount,
the outstanding principal loan balance, and
the loan term. The term of the loan,
however, cannot extend beyond 40 years.
The regulation places no limits on the size
or frequency of interest rate adjustments,
or the total that may occur over the life of
the loan. A change in rate, however, can
only be based on an index that is readily
verifiable by the borrower and beyond the
control of the lender. Lenders are prohib­ited,
therefore, from using their own cost
of funds or their current mortgage loan rate
as an index. A reduction in the index must
result in a lowering of the loan interest
rate.
The FHLBB's AML regulation allows for the
design of loans that prevent sharp or fre­quent
increases in monthly payments with
changes in the index. Under such payment­capped
mortgages, payments are held con­stant
for a specified period and rate
changes are reflected in the rate at which
the principal is amortized. Adjustments to
payments must be made at least once every
5 years, however, to compensate for the
resulting negative amortization and to
insure that the payments are sufficient to
fully amortize the loan at the then-existing
interest rate and remaining balance over the
8 VRM's and RRM's may still be written
under the AML guidelines. Restrictions and
safeguards from the previous instrument­specific
regulations, however, may not
hold.
1982 No.4 Family Economics Review 6
....,
...,
QJ
:..1.. . ....
'<
1"'1
n
0
:::J
0
3... ..
n
CD
;;o
<1>
.<... .
<1>
~
"CD'
N
z
.0
~
Table 2. Comparison of FHLBB regulations for Variable Rate Mortgages (VRM's) and Renegotiable Rate Mortgages (RRM's) 1
Major characteristics
Index for rate adjustment
Limit on frequency of rate adjustment
Limit on size of periodic rate adjustment
Limit on size of total rate adjustment
over life of mortgage
Mandatory rate adjustments
Methods of adjustment to rate changes
Limit on amount of negative amortization
Requirement to offer SFPM
Limit VRM/RRM's that lender may hold
Prepayment restrictions or charges
Notification requirements
Disclosure requirements
VRM's: Effective July 1, 1979
Cost of funds: FHLBB's index of national average
cost of funds to FSLIC-insured S&L's.
Not more than once a year.
0.5 percentage point per year.
2.5 percentage points.
Decreases mandatory; increases optional, but may
be carried over.
Alter monthly payments or extend maturity.
Negative amortization does not occur.
Yes.
50 percent of mortgage loans by dollar amount
per year.
None within 90 days of notification.
At least 30 days before effective date, notice of:
(a) Current and new rates; (b) old and new index;
(c) accumulated but unused rate changes; (d) current
monthly payments and remaining maturity; (e) for
increases, borrower options, including new payment
and maturity if loan is extended to maximum and
option to prepay; (f) the manner in which decreases
will be applied.
No later than time of loan application:
(a) Description of VRM and comparison with an SFPM,
including side-by-side comparison of rates, payments,
and terms; (b) worst case example of rates, payments,
and total costs for VRM with maximum increases taken;
(c) description of index with 10-year history, how
changes in index may be used, limits, options at
increases; (d) notice of option to elect an SFPM.
RRM's: Effective April 3, 1980
Market conditions: FHLBB's index of national average
contract rates on loans for existing homes.
Guaranteed renewal every 3, 4, or 5 years.
0.5 percentage point per year
5 percentage points.
Decreases mandatory; increases option a 1 .
Alter monthly payments.
Negative amortization does not occur.
None.
None.
None after first notification.
At least 90 days before due date of loan:
Required standard renewal notice form, includes-­(
a) New renewal term, interest rate, Truth-In­Lending
statement; (b) new monthly payment and
effective date; (c) notice of option to prepay
without penalty.
No later than time of loan application:
Required standard disclosure statement, includes-­(
a) Description of RRM and comparison with an SFPM;
(b) worst case example of rates and payments for
first adjustment, highest and lowest rate over life
of mortgage; (c) description of index, how changes
in index may be used, limits; (d) notice of right
to prepay without penalty.
1 These regulations were replaced by the more liberal Adjustable Mortgage Loan (AML) regulations in April 1981 (table 3). Although the safeguards and
limitations may not hold, VRM's and RRM's may still be written under the AML regulations. The VRM and RRM rules may still serve as a model for mortgage
instrument design and, compared with those in table 3, provide an illustration of the dramatic change in mortgage lending regulation in 2 years.
Source: Adapted from Cassidy (__!).
\0
CD
N
z
0
"'
..,
Ill
9... .
......
'<
1"1 n
0
:::J
0
.3.. .
n
(I)
;lO
t'O
<... .
Cll
:a:
CD
Table 3. Comparison of FHLBB regulations for Adjustable Mortgage Loans (AML's) and COC regulations for Adjustable Rate Mortgages (ARM's)
Major characteristics
Index for rate adjustment
AML's: Effective April 30, 1981
Any interest rate index that is readily verifiable
by the borrower and not under the control of the
lender.
Limit on frequency of rate adjustment None.
Limit on size of periodic rate None.
adjustment
Limit on size of total rate None.
adjustment over life of mortgage
Mandatory rate adjustments Decreases mandatory; increases optional.
Methods of adjustment to rate changes Any combination of changes in monthly payment,
principal balance, or loan term.
Limit on amount of negative No limit, but monthly payments must be adjusted at
amortization least once every 5 years to amortize fully the loan
over the remaining term.
Requirement to offer SFPM None.
Limit on AML/ARM's that lender may
hold
Prepayment restrictions or charges
Notification requirements
Disclosure requirements
Source: S~e references i• 20, and 23.
None.
None.
30-45 days before scheduled adjustment, notice of:
(a) New index, interest rate, payment, and effective
date and period; {b) dates of future rate and payment
adjustments; (c) dates and values, since last payment
adjustment, when rates and principal were adjusted;
{d) option to prepay without penalty.
No later than time of loan application:
Required standard disclosure statement, includes-­(
a) Brief description of AML's; {b) explanation of
key terms of specific AML offered including index,
source of information on index, and high and low
values during previous calendar year; (c) example of
the operation of the type of AML offered •
ARM's: Effective March 27, 1981
as amended April 1, 1982
FHLBB's index of national aver~ge contract rates on loans
for existing homes (monthly average); or 3-year Treasury
securities (monthly or weekly average);-or 6-month Treasury
bills (monthly or weekly average).
Not more than once every 6 months.
1 percentage point for each 6-month period between rate ad­justments;
each adjustment limited to 5 percentage points.
None.
Decreases mandatory; increases optional, but may be
carried over.
Changes in monthly payment and/or rate of amortization.
1 percent of the outstanding principal at the beginning of
any fixed-payment period for each 6-month interval in that
period; payments must be adjusted at least once every
5 years to amortize fully the loan over the remaining term.
None.
None.
None starting 30 days before first interest rate adjustment.
3Q-45 days before scheduled adjustment, notice of:
(a) Current and new rates; {b) old and new index values;
(c) accumulated but unused rate changes; {d) new monthly
payment and/or other contractual effects of the rate change;
(e) if different from (d), new monthly payment required to
amortize fully; {f) option to prepay without penalty.
No later than time of loan application:
(a) Brief description of ARM's; (b) key terms and limits of
specific ARM offered including index, source of information
on index, and a 10-year history; (c) worst case example of
payments on an ARM if rate were to increase by 10 percentage
points as rapidly as possible.
_..
'()
IX>
N
z
0
~
...,
ID
3..... ... '<
r"1
0
0
::J
0
3... ..
0
CD
::0
~
<.... .
~
~ -0
Table 4. Summary of ARM/AML plans that will be purchased by Federal National Mortgage Association (FNMA)
f' I an
2
3
4
5
6
7
8
Interest rate
index
6-month
Treasury Bi 11 s
6-month
Treasury Bills
1-year
Treasury securities
3-year
Treasury securities
3-year
Treasury securities
5-year
Treasury securities
FHLBB's index of national
average contract rates on
loans for existing homes
FHLBB's index of national
average contract rates on
loans for existing homes
Interest rate
adjustment
period
6 months
6 months
1 year
2-1/2 years
2-1/2 years
5 years
1 year
1 year
None.
None.
None.
None.
Maximum interest
rate adjustment
5 percent each adjustment
period; changes may be
carried over.
None.
None.
2 percent each adjustment
period; changes may be
carried over.
Payment
adjustment
period
6 months
3 years
1 year
2-1/2 years
2-1/2 years
5 years
1 year
1 year
Maximum payment adjustment
7.5 percent each adjustment period, at the borrower's option
with any additional increase added to loan principal up to
125 percent of original loan amount. At each 5-year interval,
the payments are reset without regard to the 7.5 percent cap
to fully amortize the remaining balance.
None: Payments remain constant for each 3-year period, based
on an interest rate the lender projects to be the average
index rate over the period. Whenever the actual index rate,
measured at 6-month intervals, is higher or lower than the
projected rate, the outstanding loan balance would be
increased (negative amortization) or decreased accordingly.
Negative amortization may not produce a loan balance of
greater than 125 percent of the original amount.
7.5 percent each adjustment period, at the borrower's option,
with any additional increase added to loan principal up to
125 percent of original loan amount. At each 5-year interval,
the payments are reset without regard to the 7.5 percent cap
to fully amortize the remaining balance.
18.75 percent each adjustment period, at the borrower's
option, with any additional increase added to loan principal
up to 125 percent of original loan amount. At each 5-year
interval, the payments are reset without regard to the 18.75
percent cap to fully amortize the remaining balance.
None.
None.
None .
None.
Note: The COC ARM regulation authorizes national banks to originate plans 5 and 8; other plans may be offered subject to review by COC. The FHLBB authorizes
Federal thrifts to originate all plans. Lenders not exempt from interest-on-interest statutes may originate plans 5, 6, 7, or 8 if their State laws otherwise
authorize ARM/AML's as planned by FNMA.
Source:' Compiled from materials supplied by FNMA.
GPAML: Graduated Payment Adjustable
Mortgage Loan
The GPAML (~. _!!), the most complex of
the AMI's, combines the adjustable interest
rate feature of the AML with the reduced in­itial
payments of the GPM. This is achieved
by use of two interest rates. The first is
the debit rate, which is the rate at which
the borrower is charged interest. The second
is the payment rate, or the rate at which
payments are computed. GPAML's are charac­terized
by variable debit rates and initial
payment rates that are lower than the debit
rate. A GPAML, then, is an adjustable mort­gage
loan on which the monthly payment
amount at the beginning of the loan term is
not sufficient to fully amortize the loan.
The GPAML goes farther than any other au­thorized
instrument in providing flexibility
to the lender while allowing for alterations
in the payment pattern to meet borrower
needs.
This instrument was first proposed by the
FHLBB in September 1980 as the Graduated
Payment Adjustable Mortgage (GPAM), in
accordance with the then-current RRM regula­tion.
When the more comprehensive AML
regulation replaced the RRM regulation in
April 1981, GPAM's were not included. Under
the AML regulation, any negative amortiza­tion
that takes place must be as a result of
a ch~:r:ge ~ the interest rate; there is no
provision m the AML regulation for reduced
initial payments that are not fully amor­tizing.
The proposed GPAM was revised in
accordance with the far more liberal AML
regulation and finalized as the GPAML in
July 1981 (~). As with the AML regulation,
the GPAML regulation provides a set of
guidelines from which the many factors in a
mortgage may be combined, potentially
resulting in a wide variety of instruments
that may all be called GPAML's.lD
Like the GPM, the GPAML allows the sched­uled
monthly payments at the beginning of
the loan to be set lower than is required to
10The COC does not distinguish between an
AML and a GPAML. The COC permits national
banks to include payment-capped instruments
with initial payments that are not fully
amortizing on an experimental basis under
the individual program review provision of
its ARM regulation.
11 Family Economics Review 1982 No.4
fully amortize the loan. The length of the
graduation period and the pattern of payment
increases are established as a matter of
negotiation between borrower and lender, but
they cannot exceed 10 years. Within 10
years, the scheduled payments must rise to a
level sufficient to fully amortize the loan
at the then-existing interest rate and
remaining balance over the remaining term.
The GPAML also operates as an AML--with
an adjustable debit rate. As with the AML,
there is no limit on the amount by which
this interest rate may be adjusted either at
any one time or over the life of the loan,
or on the frequency with which it may be
adjusted. Again, these adjustments must
reflect the movement of a single, specified
index, and they may be implemented by any
combination of increases or decreases in the
payments, in the outstanding principal loan
balance, or in the loan term. After the
graduation period, however, the payments
must be adjusted at least every 5 years to a
level sufficient to fully amortize the loan.
If interest rates go up and no increase is
made in the monthly payments, as would occur
with payment caps, the borrower must either
accept negative amortization--in addition to
that built in due to the graduated payment
feature--or extend the term of the loan.
The total loan term, however, cannot exceed
40 years.
GP AML's may be designed that offer sub­stantial
reduction in the initial payments,
but the resulting negative amortization must
be compensated for by larger subsequent
payment increases. Depending on how the
graduation period features are combined with
the adjustable rate features, GPAML's in­volve
the possibility of substantial amounts
of negative amortization and dramatic pay­ment
increases. For this reason, the FHLBB
limited the graduation period to 10 years
and required that payments be adjusted on a
regular basis to a level sufficient to fully
amortize the loan.
In May 1982, FNMA announced three mort­gage
plans that it would buy that incorpo­rate
the graduated payment feature into
adjustable mortgages. These three plans are
adapted versions of three of the eight ARM/
AML plans FNMA announced in 1981. FNMA
adjusted plan 2 to provide a loan with
maximum payment adjustments of 7. 5 percent
annually for the first 3 years of the loan.
Subsequent payment adjustments occur every
3 years and are not subject to a ceiling.
Plan 4 was adjusted in the same way as
plan 2. It also includes an option to extend
the annual payment adjustment provision with
the 7. 5 percent ceiling into years 4 through
6 and provides for interest rate adjustments
to take place every 3 years instead of every
2-1/2 years. FNMA adjusted plan 6 to provide
for maximum annual payment adjustments of
7. 5 percent during the first 5 years; for an
option to extend this annual, limited adjust­ment
into years 6 through 10; and for
subsequent payment adjustments to occur
every 5 years with no ceiling.
Balloon: Balloon Payment Mortgage Loan
The FHLBB further enhanced thrifts' abil­ity
to balance their asset and liability
yields and expanded the array of mortgage
instruments in October 1981, when it liber­alized
its regulation on Balloon Payment
Mortgage Loans (Balloon) (~). The amended
regulation permits federally regulated
thrifts to make nonamortized and partially
amortized home loans in amounts up to 95
percent of the value of the property secur­ing
the loan, subject only to the maximum
40-year term permissible for home loans.
Prior to this change, institutions under the
FHLBB jurisdiction were permitted to make
Balloon loans only up to 5 years in amounts
not exc~eding 60 percent of the value of the
property, and thus down payments of at least
40 percent were required. The FHLBB also
authorized adjustable rate Balloon loans to
provide for medium-length, adjustable loans
not allowed for by the AML regulation.
The distinctive feature of Balloon mort­gages
is that they are not fully paid at
maturity. The borrower must either pay the
remaining principal and interest--the
"balloon"--or refinance the loan. For the
borrower who plans to sell before maturity
of the loan, the Balloon offers the advan­tage
of an interest rate and payments that
are fixed for a longer period than would be
available to the long-term AML borrower. If
the house were not sold, costs of refinanc­ing
would be incurred, but the interest rate
obtained on the new loan would not be tied
to any particular index of an earlier loan.
Balloon loans may be nonamortizing or par­tially
amortizing. Periodic payments during
the life of a nonamortizing Balloon only
cover the interest on the total loan amount.
These Balloons typically mature in 3 to 5
years. Payments on partially amortizing
Balloons, which typically are longer term
loans, are fixed at the same level as pay­ments
on long-term, fully amortizing loans
of the same amount.
Balloon loans in excess of 90 percent of
the value of the securing property must be
partially amortizing. Similarly, some pay­ment
to principal is required on Balloons
with adjustable rates. Like the AML regula­tion,
the adjustable-rate Balloon regulation
allows interest rate changes to be imple­mented
through adjustments in the monthly
payment, the outstanding principal loan bal­ance,
or the term. In fact, all requirements
applying to AML's apply . to the adjustable­rate
Balloon except the provision requiring
adjustment of the payment at least every
5 years to a level sufficient to amortize
the loan fully over its remaining term.
Instead, the Balloon regulation requires
adjustments of the payment at least every
5 years to a level sufficient to fully amor­tize
a conventional, long-term loan over the
period upon which the amortization schedule
used to establish the initial monthly pay­ment
amount on the Balloon loan was based.
The initial monthly payment must be suffi­cient
to fully amortize a loan with the same
starting principal bala,nce and interest rate
as the Balloon loan over a period not
exceeding 40 years.
1982 No.4 Family Economics Review 1%
Lenders must permit prepayment without
penalty only on adjustable-rate Balloon
loans. The regulation requires mandatory
disclosure statements that include a nota­tion
that a borrower wishing to refinance at
maturity may have to pay additional closing
costs. Borrowers taking fixed-rate Balloon
loans will be provided simple disclosure
statements that include the loan balance
that will be due at maturity and a caution
that the lender is under no obligation to
refinance. Borrowers accepting adjustable­rate
Balloon loans will be provided the more
comprehensive AML disclosure form expanded
to reflect the Balloon feature. Borrowers
are also to be provided a notice of the
maturity date of the Balloon loan at least
45 but not more than 90 days prior to matu­rity
that states whether and under what con­ditions
the lender will refinance the loan.
ADDITIONAL MORTGAGE INSTRUMENTS
SAM: Shared Appreciation Mortgage
The distinctive feature of this instrument
(!, ..!.Q.. _!!, 14). which the FHLBB proposed
in September 1980 but which has not been au­thorized,
is that it would allow the lender
to share in the net appreciation of the
property securing the loan in exchange for a
below-market rate during the early years of
purchase. With a SAM. the buyer is borrow­ing
against expected appreciation and pays
the difference between a market and below­market
rate loan in a lump sum out of real­ized
appreciation rather than in monthly
payments. By providing a below-market rate
and, hence, lower monthly payments, SAM's
would qualify households for ownership that
otherwise could not buy at all, would allow
households to purchase more expensive homes
than they otherwise could afford, or would
leave more disposable income to households
choosing to "buy down" from their larger
homes or selecting less expensive homes.
1J family Economics Review 1982 No.4
Borrowers with lower or moderate incomes
with less favorable growth potential, but
purchasing properties with favorable appre­ciation
potential, could negotiate a SAM
where they could not handle SFPM monthly
payments or qualify for a GPM (14).
Under a SAM. the size of the interest rate
discount, the term of the loan, the down­payment,
and the share of the appreciation
due the lender--called "contingent interest"-­would
be negotiated between borrower and
lender and would be influenced by the ex­pected
appreciation of the property. To get
a lower interest rate, the borrower would
need to share more of the appreciation with
the lender or provide a larger downpayment.
or both. Similarly. to qualify with a
smaller downpayment, the borrower would
have to compensate the lender by accepting a
smaller interest rate discount or by sharing
a greater proportion of the appreciation, or
both.
The contingent interest would be due the
lender at the sale or transfer of the house
or at maturity of the loan, whichever came
first. Although the monthly payments would
be based on a 30-year amortization schedule,
the term of the low-interest loan would be
limited to 10 years. If the home were sold
or transferred before maturity, the contin­gent
interest would be based on the sales
price. If the house were not sold at maturi­ty
of the low-rate loan, the value of the
property would be determined by appraisal.
The FHLBB-proposed rules would require the
lender to guarantee refinancing of the re­maining
balance at maturity, including the
contingent interest. The new loan. however,
would be written at the prevailing market
rate.
Critics of SAM's warn that borrowers might
be faced with dramatically higher monthly
payments that they could not handle or might
even be forced to sell. Proponents argue
that half a house is better than none.
Critics. however, question whether many con­sumers
are in a position to adequately eval­uate
the implications of signing away future
equity gains--their greatest hedge against
inflation--in favor of the monthly subsidy
inherent in the discounted SAM rate. They
point out that the purchase of the next
"move-up" home might be as difficult as the
first for SAM borrowers.
SAM-type instruments are being developed
and offered by lenders where they do not
conflict with State law. Some are similar to
the FHLBB-proposed SAM in that they are
targeted at buyers with downpayments who
cannot handle the normal monthly payments.
Others are designed for borrowers with suf­ficient
income to cover monthly payments but
with no savings for a downpayment. The
lender or a third-party investor often
becomes a part owner of the property. Such
co-buyer or shared-equity arrangements,
which may not involve a change in the mort­gage
instrument, received impetus in early
1982 by changes in the tax code and Freddie
Mac's willingness to purchase such loans in
the secondary market.
PLAM: Price Level Adjusted Mortgage
The PLAM (__£) is a unique instrument in
that the outstanding balance is indexed to a
measure of inflation. The purpose of the
PLAM is to provide a constant payment stream
in inflation-adjusted or real dollars. In
contrast to an SFPM, in which the monthly
payments remain constant nominally but de­crease
in real terms, PLAM payments rise nom­inally
but remain constant in real dollars.
PLAM payments start out lower than those on
an SFPM and gradually rise to a higher level.
Also referred to as indexed loans or real
dollar mortgages, PLAM's have been used in
such countries as Brazil and Israel since
the early seventies. Their use have been
limited in the United States (most notably,
in Utah), but their adoption is currently
receiving attention.
Since the balance is indexed, the PLAM
does not have to be tied to a contract
interest rate that contains a premium for
expected inflation as well as a real rate.
The PLAM contract rate is the real interest
rate--a rate net of any price for uncertainty
due to inflation. The payments on a PLAM are
based on this much lower real rate. At the
end of each year, the then-outstanding bal­ance
is adjusted by an inflation index. The
payments are recalculated to reflect the
increased balance, at the same interest rate.
PLAM's, in other words, are affected by the
actual course of inflation as opposed to the
expected course of inflation that influences
other instruments. In this regard, they are
similar to SAM's.
Tying the balances of loans to an infla­tion
index provides assurance to lenders
that the value of their loans will stay cur­rent
with the dollar. Because PLAM's may be
written at the real rate of interest, they
are the most effective instrument for lower­ing
initial monthly payments. As a result,
borrowers can qualify for loans with much
less difficulty. PLAM's are similar to
GPAML's, then, in providing flexibility to
lenders and easing payment burdens to bor­rowers
as well. A modified PLAM, in which
the contract rate incorporates some inflation
premium, could be used in cases where there
is concern that the borrower's income or the
value of the property would not keep pace
with inflation.
GEM: Growing Equity Mortgage
The GEM is characterized by increasing
monthly payments, with all of the increase
applied to the principal balance. As a
result, the accumulation of equity is rela­tively
rapid and the maturity is accelerated.
GEM's are typically paid off in 12 to 15
years. Also referred to as rapid-payoff or
equity-building loans, GEM's carry an inter­est
rate that is fixed for the entire term.
The monthly payments begin at a level that
will fully amortize the loan over the term
of the contract.
With a GEM the borrower is contractually
obligating himself to what would otherwise
remain as an option over the course of an
SFPM that did not contain a prepayment
penalty. The interest rate on a GEM, there­fore,
should be lower than on a comparable
SFPM. The mortgage, in effect, is converted
from a long-term instrument to an inter­mediate-
term instrument for the lender and
thereby provides opportunity for reinvest­ment
at market rates.
The amount of the annual increase in
monthly payments on a GEM may be calculated
in one of two ways. If the loan is "indexed",
1982 No.4 Family Economics Review 14
payments are adjusted to reflect changes in
an index of inflation, wage rates, or in­come.
To provide for certainty in the
payment schedule, payment increases may
instead be set at a fixed graduation rate,
such as 3 percent per year.
GEM's are not specifically provided for
under either the FHLBB's AML or the COC's
ARM regulation.
In May 1982, the VA presented general
guidelines for the design of GEM's that it
will consider acceptable under its mortgage
loan guarantee program. Lenders wishing to
offer GEM's must submit their proposals to
the VA for review. The VA will consider
plans that call for fixed, moderate payment
increases. It will also consider those that
tie payment increases to an appropriate
indicator, provided the plan limits annual
payment increases to no more than 4 percent.
Indexed plans also must be structured to
prevent the loan maturity from exceeding 30
years 32 days if payment decreases result
from a falling index.
In mid-June, HUD/FHA indicated that it
would insure GEM's. The two initial plans
that HUD/FHA allows are based on the grad­uation
rates and schedules of plans 4 and 5
of the Section 245 GPM program. Payments
are increased either 2 or 3 percent per year
for the first 10 years of the loan. From the
11th year on, the payments remain constant.
HUD/FHA is considering a true GEM plan
with annual payment increases of 5 percent
for the full term of the mortgage.
FNMA announced that it would provide a
market for GEM's by buying these loans for
its own portfolio and, beginning in
September 1982, by commiting to issue and
guarantee securities backed by GEM's. The
first GEM's to which Fannie Mae has com­mitted
provide for annual increases in the
monthly payments ranging from 2. 5 to 7. 5
percent and result in a loan payoff in a
maximum of 15 years and a minimum of
9 years 10 months. Some of the FNMA­approved
GEM's include graduated payment
features that lower the monthly payments in
the early years of the loan. These loans
still pay off in about 10 to 15 years. FNMA
will only provide a market for GEM's that
set the amount of payment increases in
advance, rather than tieing them to an
index.
15 Family Economics Review 1982 No.4
IMPLICATIONS FOR INDIVIDUALS, FAMILIES,
AND PROFESSIONALS
The new mortgage designs will increase the
choices available to families and individ-uals
and provide more opportunity to fit
housing finance decisions more closely to
specific needs and circumstances, but they
will also require that greater risk and cost
be assumed. Would-be home buyers will need
to collect and evaluate greater amounts of
complex information and to deal with more
uncertainty than ever before.
To decide on the most appropriate mortgage
loan for their circumstances, borrowers will
need to evaluate how different mortgage fea­tures
will interact with their anticipated
incomes; their earning, expenditure, and
mobility patterns; and the appreciation po­tential
of the homes they wish to purchase.
They will require extensive information on
mortgage characteristics and factors that
influence the nature of the payment stream
and total costs over the life of the loan
(15).
Furthermore, because the new regulations
provide for a great deal of flexibility in
the design of new instruments and because
the instruments are potentially complicated
to administer, individual lending institu­tions
will likely develop and offer only a
few specific instruments. Hence, financing
policies and techniques will likely vary not
only from State to State but also from
institution to institution as well. Knowl­edgeable
shopping will be essential for wise
decisionmaking.
Professionals who work with individuals
and families will need to understand the new
instruments, provide thorough and accurate
information, and encourage consumers to seek
and use this information.
LITB.RATUILB CITED
1. Cassidy, Henry J. 1980. Comparison and
Analysis of the Consumer Safeguards of
Variable Rate and Renegotiable Rate
Mortgage Instruments. Research Working
Paper No. 95. Federal Home Loan Bank
Board, Office of Policy and Economic
Research.
2. 1980. Price-level adjusted
mortgages versus other mortgage instru­ments.
· Federal Home Loan Bank Board
Journal 13(1):3-11.
3. Dalton, John H. [Chairman, Federal Home
Loan Bank Board] 1981. Statement before
the Subcommittee on Housing and Urban
Affairs; Committee on Banking, Housing,
and Urban Affairs; U.s. Senate.
4. Federal Home Loan Bank Board. 1981.
Final rule, 12 CFR Part 545 (No. 81-
206). Adjustable Mortgage Loan instru­ments.
Federal Register 46 (83): 24148-
24153.
5. 1981. Final rule, 12 CFR
Part 545 (No. 81-402). Graduated
Payment Adjustable Mortgage Loan
instruments. Federal Register 46(140):
37625-37628.
6. 1981. Final rule, 12 CFR
Part 545 (No. 81-608). Balloon-Payment
Mortgage Loans; Reverse-Annuity
Mortgage Loans. Federal Register
46(205):51893-51897.
7. Fishbein, Allen J. 1981. ARMs pose a
threat to urban revitalization. Journal
of Housing 38(10): 530-533.
8. Freiberg, Lewis. 1982. The problem with
SAM: An economic and policy analysis.
Housing Finance Review 1(1): 73-91.
9. Groves, Allan M. 1980. Choosing the
right VRM index. Federal Home Loan
Bank Board Journal 13(8): 4-7.
10. Hu, Joseph. 1981. How to build a SAM.
Seller-Servicer 8(2): 30-33.
11. 1981. In search of the ideal
mortgage. Seller-Servicer 8(2): 21-29.
12. Kling, Arnold. 1982. Son of SAM: A pro­-
posal for a Deferred-Payment Mortgage.
Housing Finance Review 1(1): 93-102.
13. McGowan, Daniel A., and Jeffry A.
Lynch. 1980. Various types of Reverse
Mortgages. Housing and Society 7(3):
193-207.
14. McKenzie, Joseph A. 1980. A comprehen­sive
look at Shared Appreciation
Mortgages. Federai Home Loan Bank
Board Journal 13(11): 11-15.
15. Meeks, Carol B. 1981. New alternatives
for financing homes: Implications for
family decision-making. Paper presented
at the Family Economics-Home Management
Workshop [Stockton College, Pomona,
N.J., June 19].
16. Melton, William C. 1980. Graduated
Payment Mortgages. Quarterly Review
5(1): 21-28. Federal Reserve Bank of
New York.
17. and Diane L. Heidt. 1979.
Variable Rate Mortgages. Quarterly
Review 4(2): 23-31. Federal Reserve
Bank of New York.
18. National Credit Union Administration.
1981. Final rule, 12 CFR Part 701.
Adjustable Rate Mortgage Loans; Dereg­ulation
of lending policies, amortiza­tion,
and payment of loans, and lines
of credit; Fixed Rate Mortgage Loans.
Federal Register 46(145):38669-38678.
19. Rochester, David F. 1980. Meeting
future demands for housing credit: The
savings and loan perspective. Housing
and Society 7(3): 164-171.
20. Seiders, David F. 1981. Changing
patterns of housing finance. Federal
Reserve Bulletin 67(6):461-474.
21. Thompson, Frank A., Jr. 1980.
Homeowner's equity: Providing lifetime
annuities for the elderly. Federal Home
Loan Bank Board Journal 13(12): 23-28.
22. U.S. Department of Housing and Urban
Development, Office of Housing. 1980.
Characteristics of FHA Single-Family
Mortgages, Selected Sections of
National Housing Act.
23. U.S. Department of the Treasury, Office
of the Comptroller of the Currency.
1981. Final rule, 12 CFR Part 29 (No.
81-10). Adjustable-Rate Mortgages.
Federal Register 46(59): 18932-18947.
24. U.s. General Accounting Office, Comp­troller
General of the United States. -·
1981. New Mortgages for Financing
Homes Need Uniform and Comprehensive
Consumer Safeguards, CES-81-53.
1982 No.4 Family Economics Review 16
AS FAMILY ECONOMICS REVIEW WENT TO PRESS:
FEDERAL HOME LOAN BANK BOARD ANNOUNCES HOME LOAN AMENDMENTS
Effective August 16, 1982, the FHLBB replaced its existing regulations authorizing the
issuance of specific types of mortgage instruments with a general authorization to make
home loans on which the interest rate, the payment, the loan balance, and/or the
maturity may be adjusted. These amendments are designed to enhance the ability of
lenders and borrowers to develop a broader variety of mortgage instruments to meet
their home financing needs.
Since 1979, when the FHLBB authorized the first AMI's for thrifts under its jurisdic­tion,
regulations for AMI's have become more general. The first rules, such as those for
GPM's, VRM's, and RRM's, detailed the exact terms and restrictions for each individual
instrument. More recent AMI regulations, such as those for AML's and GPAML's, present
broad guidelines under which a variety of individual instruments can be designed.
Nevertheless, the regulation for each type of AMI has been written as an exception to a
fixed-payment instrument.
The new amendments provide Federal thrifts broad authority to structure all types of
home loans. The amendments set forth the basic parameters within which adjust-ments
may be made and establish the requirement that such adjustments may be made
subject to limitations contained in the loan contract. In effect, then, the new regula­tions
allow for the design of any of the instruments discussed in the preceding article-­including
SAM's, PLAM's, and GEM's--and any variation on these general types. Selected
provisions of the amendments are summarized below:
Permissible Adjustments
Interest rate. The interest rate may be adjusted to reflect changes in any index
expressed in terms of an interest rate, which would include all indexes previously
permitted under the AML regulation or any index representative of the rate of inflation.
An index that measures the rate of change in consumer disposable income may also be
used. Interest rate adjustments must correspond directly to the movement of the index,
and the index must be readily available to and verifiable by the borrower and beyond
the control of the lender.
Payment. Payments may be adjusted (1) to reflect an interest-rate change or a
change in the loan balance; (2) to reflect a change in a national or regional index of
inflation, or the rate of change in disposable income, that is readily available to and
verifiable by the borrower and is beyond the control of the lender; or (3) pursuant to a
formula or to a schedule specifying the percentage or dollar change ·in the payment and
set forth in the contract.
Loan balance. The loan balance may be adjusted to reflect an increase or decrease
in the loan rate or a change in a national or regional index that measures the rate of
inflation' or the rate of change in consumer disposable income, that is readily available
to and verifiable by the borrower, and that is beyond the control of the lender.
Loan term. Adjustment to the loan term must reflect increases or decreases in the
interest rate, the payment, or the loan balance. The loan term may never exceed 40
years.
Payment Schedules
Home loans do not have to be repaid in monthly installments. Payments must only be
made semiannually.
17 family Economics Review 1982 No.4
Prepayment Penalties
Lenders may not impose prepayment penalties on instruments that provide the thrift
with protection against interest-rate fluctuations. Thrifts may impose a prepayment
penalty if the loan contract provides that after loan closing and after each interest
rate adjustment the interest rate remains fixed for a period of at least 5 years.
Disclosure
Prior to accepting an application for a loan, the lender must disclose to each loan
applicant . the terms of the loan offered on one or more documents other than the loan
documents. The materials provided must include at least that portion of the following
information relevant to the type of loan being offered:
•
•
A general explanation of the fact that (a) the lender and applicant become bound
by the terms of the loan contract upon signing it; (b) that even though either
party may later request a change, neither is bound to agree to such a request;
and (c) since the loan contract and mortgage (deed of trust) establish the rights
of the borrower, that he or she should understand the provisions.
Term to maturity.
Initial interest rate, if known, or the manner in which the initial rate will be
established.
The amount of the initial payment, if known, and an explanation of how the lender
establishes an amortization schedule for the loan, including how the portion of
each payment that goes towards principal and interest is determined.
A full explanation of how the interest rate, the payment, the loan balance, or
the term to maturity may be adjusted; identification of the index(es) to be used
and how index values may be obtained by the borrower; and how the adjustment of
one item may affect the others.
What information will be contained in each notice of an adjustment or maturity,
and how far in advance each notice will be provided.
A statement that a large payment may be due at maturity of the loan and that the
lender is under no obligation to refinance the loan.
A description of any prepayment penalty.
Whether the contract will provide for escrow payments, their purpose, and how
their amounts are established.
An example of the interaction of all variable features of the loan over any
period of time.
Negative Amortization
Lenders may defer and capitalize interest for a period of up to 10 years after loan
closing, after which the payment must be adjusted to a fully-amortizing level at 5-year
intervals. Alternatively, lenders may limit negative amortization so that the loan
balance never exceeds 125 percent of the original appraised value.
Call Loans
A loan contract may provide the lender the right to call the loan due and payable
either after a specified number of years has elapsed following closing or upon the
occurrence of a specified event external to the loan, such as market rates dropping
below X percent or the rate of inflation exceeding Y percent.
1982 No.4 family Economics Review 18
Home Sewing nends
by Joan C. Courtless
Family economist
Professional home economists have tradi­tionally
advocated home sewing as a good way
to "stretch the clothing dollar." Simplicity
Pattern Company1 (!.Q) reported that
economic reasons were cited most often by
1, 000 surveyed women, including both sewers
and nonsewers, in deciding whether to sew or
to purchase a garment. A survey reported in
Homesewing Trade News (~_), however, found
that sewers were motivated less by economic
reasons and more by the pleasure and person­al
satisfaction gained from sewing. A recent
analysis of consumer expenditure survey data
reported here found that as spending for
sewing increased so did spending for ready­made
clothing. Apparently home sewers were
not substituting sewn garments for ready­to-
wear as would be expected if the motive
for sewing was to save money.
According to the American Home Sewing
Association, 37 percent of women never sew
and an additional 17 percent make only minor
sewing repairs (~). This implies that 63
percent do some sewing and 46 percent are
home sewers. A nationwide survey, conducted
by Making It, a consumer publication, and
reported by Home Sewing Trade News (~),
found that two-thirds of women who identifi­ed
themselves as home sewers were 35 years
or older, with incomes under $35,000, and
with some college education; one-third were
employed full time and an additional third
worked part time outside the home; and one­half
lived in a multiadult household with
children. Although the majority of women are
sewers to some degree, the amount of home
sewing has declined as evidenced by the de­crease
in retail sales of piece goods. The
quantity of fabric sold at retail declined
1Reference to a company name is used in
this publication solely for the purpose of
providing specific information. Mention of a
company name does not constitute a guarantee
or warranty of the company by the U.S.
Department of Agriculture or an endorsement
by the Department over other companies not
mentioned.
19 family Economics Review 1982 No.4
one-third, from 1. 5 billion square yards in
1976 to 1. 0 billion square yards in 1980
(~).
Analysis of Household Sewing Expenditures
In an analysis of consumer expenditure
data, conducted by the Family Economics
Research Group, Agricultural Research Serv­ice,
household characteristics associated
with the purchase of home sewing materials
were identified, and the relationship of
expenditures for home sewing to the total
clothing budget and its components was
examined.
Expenditures for yard goods and sewing
notions for clothing were reported by only
44 percent of almost 20, 000 households that
participated in the 1972-73 Consumer Expen­diture
Survey, conducted by the Bureau of
2 Labor Statistics, U.S. Department of Labor.
A comparison of households having sewing
expenditures with those having none is shown
in table 1 for selected household character­istics.
Home sewing households were larger,
were more highly educated, and owned more
cars; they were more often headed by a
husband and wife and more likely included a
girl between the ages of 6 and 17.
The average expenditure for yard goods
and notions for households that did some
sewing was $63. 3 A bout one-half of these
households spent less than $28, one-fourth
between $28 and $70, and another one-fourth
$70 and over. Households spending at the
highest level for sewing materials were
assumed to be those with active home sewers.
These households also spent significantly
more on clothing and shoes and had higher
levels of overall expenditures than those
who reported sewing expenditures under $70.
(table 2).
To further examine the relationship be­tween
clothing expenditures, overall expend­iture
level, and home sewing, a multiple
2Data derived from the Interview Survey
Detailed Public Use Tape No. 2, 1972-73.
3Costs are updated to 1981 using annual
average figures from the Consumer Price
Index (CPI-W).
regression analysis was undertaken. Overall
expenditure level was found to explain near­ly
half the variation in overall clothing
expenditure and about one-third the varia­tion
in expenditures for shoes, men's and
boys' clothing, and women's and girls'
clothing. Almost none of the variation in
clothing or shoe expenditures, however, was
explained by home sewing; thus, although
households that spend more for sewing have
higher levels of clothing expenditures, this
difference apparently is associated with
their higher overall level of living. House­holds
with more money to spend on all
categories of consumer items will probably
also spend more on clothing and shoes. 4
An additional analysis of the sewing
households indicated that differences in
sewing expenditures were not explained by
overall expenditure level or clothing
4A study done by Dardis, Derrick, and
Lehfeld (_~) at the University of Maryland on
factors affecting clothing expenditures us­ing
1972-73 consumer expenditure data found
that clothing expenditures increased by 1. 2
percent for each percent increase in total
expenditures.
Table 1. Characteristics of households reporting sewing expenditures compared with households
reporting none
Characteristic
Number of households •••••••••••••••••••••••
Family composed of husband,
wife, and at least 1 child
6 years or older .......................... .
4 or more members •••••••••••••••••••• • • • • • •
Girl(s) between 6 and 17 years ••••••• • • • • • •
Head married .• ..•...•.•.............. · • · • · • •
High school graduate ••••••••••••••• • • • • • •
College graduate ............ · . · •. • · • • • • • • •
Salaried professional,
manager, or craftsperson ••••••••••••••••
Employed full time •••••••••• • • • • • • • • • • • • • •
Spouse 30 to 49 years •••••••••••• • • • : • • • • • • •
Some college •.......•...... • • • • · · • • · · • • • • •
Employed •••.•.••••...... • · • • · • • · • • • • · · • • •
Full time •.•....•.••.••• · • • • • • • • · · • • • · • •
Part time ..•............. • • • · • • • · • • • · • • ·
Own 1 or more sewing machines ••••••• • • • • • •
Own 2 or more cars .......• • • • • · • • • • • · · • • • · ·
Percent of households
With sewing
expenditures
8,865
42.7
47.3
34.0
81.0
65.0
18.1
41.1
78.1
48.3
28.7
51.7
34.1
17.6
85.4
47.9
Without sewing
expenditures
11,093
22.2
24.0
15.1
57.3
51.6
12.3
27.7
62.1
34.5
19.8
45.7
33.6
12.1
42.0
29.4
Source: U •S• Department of Labor, Bureau of Labor Statistics, Consumer Expenditure
Survey 1972-73 data.
1982 No.4 Family Economics Review 20
expenditures. Less than 5 percent of the
variation in spending for sewing materials
could be attributed to overall expenditure
level, clothing expenditures, and household
size combined. A positive relationship
between spending for sewing materials and
spending for clothing and shoes was found.
That is, households that spend more for sew­ing
materials also spend more for clothing.
An examination of the various components of
the clothing budget indicated this relation­ship
was strongest for shoes and weakest for
women's and girls' clothing, and suggested
that home-sewn garments were most often
items for women and girls.
The traditional supposition that sewing is
done for economic reasons is not supported
by this analysis. Sewing most frequently
occurred in households at the highest level
of living. Since these households also spent
more than others for readymade clothing and
shoes, there is no indication that these
households substituted home-sewn garments
for purchased clothing to free money
resources for other budget items.
Conclusions
In the midfifties, a Department of Agri­culture
study on the economy of home sewing
(1) found that money can be saved by home
s-;wing. Since labor costs take a larger
share of the total manufacturing cost of
high-priced than of low- priced clothing, the
benefits from home sewing were shown to in­crease
when time was spent on sewing high­priced
garments. Early surveys <i-~) on
home sewing or clothing acquisition found
that lower costs or saving money was the
reason given most often for sewing at home.
Today, although women are aware some
savings could be achieved through sewing at
home, they are unlikely to start sewing for
economic reasons. They are more likely to
postpone buying, do more clothing repair,
recycle, and buy items on sale (!). The
current decline in home sewing can be attri­buted
to the increased participation of
women in the labor force, with less time for
sewing; smaller housing units with less sew­ing
workspace; and a decline in the number
of clothing construction classes offered in
Table 2. Household expenditures at 4 spending levels for sewing.
Sewing spending level
All households ••••••••••••••••••••••••
No sewing expenditures •••••••••••••
Less than $28 ....•..................
$28 to $7 0 ••••••••••••••••••••••••••
$70 or more ..•..................•...
Total
$769
648
794
921
1,126
Household expenditures
Clothing and shoes 1
Wanen Men
and and Shoes
girls boys
$269 $226 $126
222 198 100
288 225 133
335 258 157
388 325 204
CNerall
expenditure
level2
$17,404
15,335
17,967
19,944
23,377
1Total includes clothing for infants under 2 and spending for accessories and jewelry not
included in any of the 3 subcategories.
20verall expenditure figures have been adjusted to exclude occasional major expenses such
as downpayment on a house.
Source: U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditure
Survey 1972-73 data.
21 family Economics Review 1982 No.4
high schools (~). Nevertheless, sewing has
a very positive image among women regard­less
of age, employment, or whether or not
they sew themselves. It is considered a
creative activity, and those who sew are
admired for their ability and accomplishment
(10).
Sewing programs can be targeted toward
families with middle to high incomes and
toward those more interested in the creative
aspects of s.ewing than in an economic advan­tage.
Since a majority of home sewers are
employed outside the home, simplified pat­terns
and construction methods, and one-stop
shopping where material, notions, patterns,
and lessons are available would be a time­saver
for working women. To meet the needs
of families with low incomes, home econo­mists
in teaching and extension can continue
to emphasize wardrobe planning, elements of
good construction in ready-to-wear clothing,
and repair techniques rather than saving
money by sewing.
SELECTED REFERENCES
1. Brew, Margaret L., Carol M. Jaeger,
and Margaret Smith. 1958. Exploratory
Studies of Measuring Money Savings and
Time Costs of Homemade Clothing. ARS
62-8. U.S. Department of Agriculture,
Agricultural Research Service.
2. , Roxanne R. O'Leary, and
Lucille C. Dean. 1956. Family Clothing
Inventories and Purchases ••• With an
Analysis To Show Factors Affecting
Consumption. Agriculture Information
Bulletin No. 148. U.S. Department of
Agriculture, Agricultural Research
Service.
3. Dardis, Rachel, Frederick Derrick, and
Alane Lehfeld. 1981. Clothing demand in
the United States: A cross-sectional
analysis. Home Economics Research
Journal 10(2):212-222.
4. Fehringer, Anne, Leone Ohnoutka, and
Joan Laughlin. 1980. Economic condi­tions
and their impact on information
dissemination concerning clothing
resources. Inside UN Research.
University of Nebraska, Lincoln.
5. Homesewing Trade News. 1981. Consum­ers
say they sew for pleasure. December
issue, pp. 1, 14-16. Rockville Center,
N.Y.
6. Kaitz, Evelyn F., and Thomas M. Stack.
1974. Consumers' Buying Practices,
Uses, and Preferences for Fibers in
Retail Piece Goods. Marketing Research
Report No. 1013. U.S. Department of
Agriculture, Economic Research
Service.
7. O'Brien, Ruth. 1927. Present Trends in
Home Sewing. Miscellaneous Publication
No. 4. U.S. Department of Agriculture,
Bureau of Home Economics.
8. Rosencranz, Mary Lou. 1958. Relevance
of Occupation and Income to Mothers'
Selection of Clothing for Daughters.
Michigan State University, East
Lansing.
9. Sew Business.1981. Non-apparel items
now 30% of OTC market. Vol. 120,
No. 9, pp. 38-41. Sylvan Publishing,
Inc., New York, N.Y.
10. Simplicity Pattern Co. 1979. Research
survey. Annual Report. pp. 3-6.
Family Food Budgeting . .. For
Good Meals and Good Nutrition
This revised bulletin presents the USDA
family food plans at four cost levels.
These plans are intended to help families
select a nutritious diet at a price they can
afford. Amounts of food from various food
groups that provide well-balanced meals and
snacks for family members are given for the
thrifty, low-cost, moderate-cost, and
liberal plans. Information is included on
how to select a food plan, estimate its cost
and amounts of food, plan family meals, and
cut food costs. Sample menus for a day at
each of the four cost levels are given.
This bulletin, HG-94 (December 1981), is
for sale by the U.S. Government Printing
Office, Washington, D. C. 20402.
1982 No.4 Family Economics Review 22
Economic Well-Being of the
Elderly: Recommendations
From the White House
Conference on Aging
By Joyce M. Pitts
Home economist
The White House Conference on Aging
(WHCoA) was held in Washington, D.C., from
November 29 through December 3, 1981. "The
Aging Society--Challenge and Opportunity,"
the Conference theme, reflected the growing
social and economic influence of older
Americans. This Conference, the fourth such
national Conference since 1950, was author­ized
in 1978 "for the purpose of arriving at
facts and recommendations concerning the
utilization of skills, experiences, and
energies, and the improvement of conditions
of older individuals •••• " 1
Activities leading up to the 1981 WHCoA
extended over 3 years and into two presiden­tial
administrations. Pre-Conference activi­ties
included local community forums, State
and territorial conferences, area mini­conferences,
and the selection of several
fact-finding technical committees.
Conference delegates were either elected at
State conferences or appointed by State gov­ernors,
members of Congress, WHCoA commit­tees,
government agencies, or various other
organizations. At the national Conference,
delegates were assigned to 1 of 14 topical
committees2 according to their specific
1P.L. 95-478, 95th Congress, October 18,
1978, Amendments to the Older Americans
Act--Title II, White House Conference on
Aging, 92 Stat. 1551.
2These committees included: Implications
for the Economy of an Aging Population;
Economic Well-Being; Older Americans as a
Continuing Resource; Promotion and Mainte­nance
of Wellness; Health Care and Services;
Options for Long Term Care; Family and Com­munity
Support Systems; Housing Alterna­tives;
Conditions for Continuing Community
Participation; Educational and Training
Opportunities; Concerns of Older Women,
Private Sector Roles, Public Sector Roles,
and Research.
23 Family Economics Review 1982 No.4
interests. More than 600 resolutions were
formulated in these committees and passed by
the Conference.
Recommendations relating to economic
well-being, including social security,
pensions, employment, inflation, and taxes,
were among the most debated topics at the
Conference.
Recommendations
Social security is a national program,
with the object of providing continuing
income to persons who have experienced a
reduction or loss in income through retire­ment,
disability, or death. Although social
security was not designed to provide total
income to families and individuals, in 1977
about 26 percent of elderly persons reported
having social security as their sole source
of income.
Given the importance of social security to
the economic well-being of the elderly, this
topic attracted the most attention at the
Conference. Final resolutions recommended
that the Federal Government:
Maintain current benefits, including
current eligibility conditions and retire­ment
ages.
Determine eligibility without regard to
personal assets.
Phase out earnings limitations.
Grant semiannual cost-of-living
increases.
Amend Title XVI, Supplemental Security
Income, to raise benefits above the poverty
level.
Maintain early retirement option with
no change in current adjustments, but with
inducements to encourage late retirement
(such as increasing retirement credit for
workers who postpone retirement beyond age
65 from 3 percent to 8 to 10 percent per
year).
If possible, preserve the traditional
means for financing social security--the
payroll tax.
Have Federal employees pay into the
social security fund.
Have a nonpartisan commission invest
social security funds.
CHARACTERISTICS OF THE ELDERLY
The elderly represent the fastest growing segment of the American population. By the
year 2000, they are expected to account for about 12 percent of the total U.s. popula­tion.
3 Women make up the majority of the older population, outnumbering their male
counterparts by about 4. 5 million.
Elderly Americans comprise one of the poorest segments of the population. The 1978
median income for persons 65 years of age and over was $5,630. In 1979, 15 percent
lived below the poverty level. Elderly women and minorities are far more likely to be
poor th~n men; the highest poverty rate, about 42 percent, is experienced by black
women, as the following table shows:
Poverty rates of persons 65 years and over, by se.r and race
Race Male Female
White ................... 9.5 15.8
Black ................... 26.9 41.7
Spanish .............•... 22.7 29.1
All races ............... 11.0 17.9
Both sexes
13.2
35.5
26.1
15.1
Source: U.S. Department of Commerce, Bureau of the Census, Characteristics of the
Population Below the Poverty Level: 1979, Series P-60, No. 130.
The major sources of income for the elderly are social security (which provides 38
percent of aggregate money income), employment earnings (23 percent), retirement in­come
and pensions (16 percent), and assets (19 percent). The additional 4 percent is
provided by public assistance and other sources. The majority of elderly persons have
several of these sources. The proportion of individual income provided by each source
depends on age, sex, and marital status. Social security is the single most important
source, with 91 percent of married couples and 89 percent of individuals receiving
benefits. In 1978, 24 percent of social security recipients also received income from
earnings. Although earnings are a major factor in determining the economic well-being
of the elderly, the proportion of employment earnings contributing to elderly income
has declined over recent years. Income from earnings drops as age rises. Married cou­ples
are more likely to receive employment earnings than are individuals. The receipt of
private pension benefits has increased over recent years. Married couples are also twice
as likely to receive pension income in addition to social security than are single
elderly persons. Income received from assets includes interest paid on saving accounts,
dividends from stocks and bonds, and additional revenue from rent, royalties, and
estates and trusts. Over half of all persons 65 and over receive some income from
assets.
Not all elderly persons are poor. In 1979, about one out of seven elderly persons had
incomes of $10,000 or more and one-half of these had incomes of $15,000 or more.
Indexing is an important process that moderates the effect of inflation for the elderly.
Increases are made in social security and some pension benefits in response to increases
in the Consumer Price Index (CPI). Most elderly persons live in homes they own, pay
lower taxes than younger persons with comparable incomes, and are able to ease some of
the effects of inflation through various "senior citizen discounts."
3All data cited refer to persons 65 years of age and over.
1982 No.4 Family Economics Review Z4
Steps have already been taken to implement
several WHCoA social security recommenda­tions.
President Reagan has established a
bipartisan task force on social security
reform to work with him and Congress in
determining long term reforms that will make
social security financially secure.
An amendment to the Omnibus Reconciliation
Act of 1981, P.L. 97-123, restored minimum
benefits to persons already receiving them
and for those who reached eligibility before
January 1, 1982. Minimum benefits were to be
terminated as of March 1982, but were rein­stated
before that date. This legislation
also allowed borrowing from medicare and
disability trust funds to help the Old Age,
Survivors, and Disability Insurance Fund
meet its 1982 obligations.
Pensions and social security both have
the same goal of providing retirement
income, but only about 32 percent of elderly
persons receive benefits from private pen­sions.
Pension coverage for women continues
to fall far below coverage for men because
women have been traditionally employed in
jobs not covered by pensions, such as part­time,
temporary, non unionized, service, and
trade-oriented jobs. Pension plans held by
women are also less likely to be vested than
those held by men.
Pension policies have been under study for
several years in the Federal Government. The
President's Commission on Pension Policy,
mandated by Executive Order 1207 on July 12,
1978, recommended the establishment of a
Minimum Universal Pension System (MUPS) to
correct some of the inequities of current
pension plans. MUPS would be funded by
employers' contributions and made available
to all workers. Employees 25 years of age
and over with at least 1 year of service and
1, 000 hours of employment would be eligible.
Vesting of benefits would begin immediately.
Removing all cash over $500 from the plan
before retirement would be prohibited
(unless transferring to another plan) and
survivor benefits would be mandatory unless
waived by both spouses. 4
4For additional information on MUPS, see
Family Economics Review, fall 1981, p. 13.
25 Family Economics Review 1982 No.4
Some of the recommendations made by the
President's Commission on Pension Policy
were reaffirmed at the WHCoA. Conference
resolutions called for:
Adequate actuarial funding for
pensions.
• Incentives that encourage workers and
employers to seek private pension plans.
Earlier vesting and greater portability
of pension plans.
Taxation relief and at least 50 percent
of a deceased worker's pension be provided
for the surviving spouse.
Both spouses to agree to a waiver of
survivor benefits.
Pension rights to be included in the
division of material property in divorce.
Employment discrimination in hiring
practices, compensations, and other benefits
of employment against persons age 40 to 65
was made illegal through the 1967 Age Dis­crimination
in Employment Act (ADEA). In
1978 an amendment to this act raised the
upper age limit from 65 to 70 years. 5
Mandatory retirement was one issue
addressed by this law. There are several
reasons why late retirement can be benefi­cial.
First, high rates of inflation have
caused many elderly persons to supplement
their social security and pension incomes
with earnings; second, research has shown
that forced retirement can have a detri­mental
effect on a person's physical and
mental health, possibly even shortening the
lifespan; and third, when the baby boom
gener-ation reaches retirement, an unfair
burden of support may be placed on the
younger, working generation.
Age discrimination in the labor force has
threatened the economic well-being of the
elderly by depriving them of employment,
earned income, promotions, and training
opportunities. To help alleviate this
situation, the WHCoA made the following
resolutions:
5 In the private sector, the law exempts
those positions where age is a necessary
occupational qualification. There is no
upper limit for age discrimination in the
Federal sector except in certain occupa­tions,
such as air-traffic controllers and
law-enforcement officers.
• Provide a leadership role for
employment of the elderly at all levels of
government.
Eliminate mandatory retirement based on
age.
Develop flexible work options for the
elderly, including part-time, job sharing,
flexi-time, temporary employment, and phased
retirement.
Provide the elderly with job training,
retraining, ~nd preretirement training.
Establish an older workers' employment
task force to consider how laws and regula­tions
discourage the private sector from
hiring the elderly on less than a full-time
basis and how changes can be made to
encourage a positive attitude toward hiring
the elderly.
Inflation is a serious economic problem
facing the elderly. High inflation rates of
past years have reduced the purchasing
power of all Americans. This reduction is
felt especially among those elderly on fixed
or limited incomes. In 1981, the CPI rose an
average of 8 percent. At this rate of
inflation, the spending power of a fixed
income is reduced by 70 percent at the end
of 15 years.
The WHCoA Committee on Implications for
the Economy of an Aging Population stated
that the highest priority should be given to
macroeconomic policies to stop inflation.
This committee made the following resolu­tions
for reducing inflation:
Obtain a moderate and steady growth in
the money supply.
Reduce growth of the Federal budget
and marginal tax rates.
Eliminate government regulations that
impose costs greater than their benefits.
Balance the Federal budget.
Use regulatory action where appropriate
to promote price competition.
Refrain from any action, such as tax
increases, that could be inflationary or
lessen competition.
Tax recommendations at the WHCoA took
the form of .incentives for individuals, fam­ilies
and private sector organizations, and
of additional tax relief for the elderly.
Resolutions passed recommended:
Tax breaks for persons caring for aging
family members in their home and for com­panies
that provide preretirement training,
pension plans, and job training for their
elderly workers.
Encouragement of elderly voluntarism
through tax incentives.
More tax relief to elderly persons on
fixed incomes from dividends, interest on
savings, and U.S. Savings Bonds.
More tax relief for the middle-income
elderly by eliminating income tax on an
additional $2,500 of taxable income for
individuals and $5,000 for couples.
Allowing all single elderly persons to
qualify as heads-of-household and use the
preferential tax rates.
Increasing tax exempt levels in the
Federal income tax.
Final Report 6
A followup survey of the delegates was
conducted to determine the most and least
important resolutions passed at the Confer­ence.
Results showed that the most favored
recommendations concerned eliminating
restrictions on elderly workers, providing
tax incentives for caring for the elderly at
home, permitting interfund borrowing, and
opposing cuts in social security. Of the
recommendations least favored b.y Conference
participants, most were part of the infla­tion
fighting plan passed by the Committee
on Implications for the Economy of an Aging
Population.
Legislation authorizing the 1981 Confer­ence
also mandated that a final report of
the resolutions be submitted to the Presi­dent
along with a national policy on aging
and recommendations for implementing this
policy.
6Copies of the 3-volume Final Report, the
White House Conference on Aging, are
available from the U.s. Government Printing
Office, Superintendent of Documents,
Washington, D.C. 20402:
Vol. 1. National Policy on Aging,
052-04700032-3.
Vol. 2. Process Proceedings,
052-04700030-7.
Vol. 3. Recommendations, Post­Conference
Survey, 052-04700031-5.
1982 No.4 Family Economics Review 26
The National Policy on Aging presented by
the Secretary of Health and Human Services
included the following objectives:
• To provide the elderly with the oppor­tunity
to live an independent and healthy
life.
• To encourage the elderly to remain in
the economic and social mainstream.
• To provide economic, medical, and
social support to the elderly who really
need help.
• To discuss choices that must be made as
a result of the large baby boom generation
that will become elderly in the 21st
century.
specific recommendations made to implement
these objections included:
• Protecting the solvency of the Social
Security Trust Fund in the short run by
such methods as interfund borrowing, while
developing long-range solutions that insure
that those contributing to the system will
receive future benefits.
• Encouraging programs that enable
elderly persons to receive income for the
equity value in their homes.
• Increasing employment and job training
opportunities for the elderly and elimi­nating
mandatory retirement.
Eliminating labor force disincentives
in public and private retirement programs,
including the earnings test for social
security.
• Controlling inflation through a slow,
steady money growth, reduced marginal tax
rates, and reductions in Federal budget
outlays.
• Rescinding regulations that unnecessar­ily
inhibit the private sector's ability to
meet society's needs.
• Pursuing economic policies that in­crease
and improve the quality of productive
capital.
Encouraging individual initiative to
provide for retirement and other goals by
saving and investing in productive capital
through tax incentives.
27 Family Economics Review 1982 No.4
SELECTED REFERENCES
1. Hefferan, Colien. 1981. Retirement
income. Family Economics Review, winter
issue, pp. 3-12.
2. u.S. Department of Commerce, Bureau of
the Census. 1979. Social and Economic
Characteristics of the Older Population:
1978. Special Studies, Series P-23,
No. 85.
3. 1981. Characteristics of the
Population Below the Poverty Level:
1979. Series P-60, No. 130.
4. U.S. Department of Health and Human
Services, Social Security Administra-tion.
1981. Income and Resources of the
Aged, 1978. SSA Publication No. 13-11727.
5. White House Conference on Aging. 1981.
Chartbook on Aging in America.
6. 1982. Final Report, the White-
House Conference on Aging. Vols. 1-3.
7. , Office of Project Develop-ment.
1981. Recommendations From the
White House Conference on Aging.
Household Size and Prices Paid
for Food
By Laurence J. Ritzmann
Statistician
Consumer Nutrition Center
Human Nutrition Information Service
Many studies show that the cost of feeding
a person in a large household is less than
in smaller households. One reason is that
the unit cost of food marketed in large
containers is usually less than in small
containers. Large households can take advan­tage
of these economy sizes, whereas their
use by small households may result in wasted
food. Another reason may be that large
households use different foods than small
households. Prices reported by households of
1 different sizes in a 1977 nationwide survey
were used in a study conducted by the
Human Nutrition Information Service to
1 USDA's Nationwide Food Consumption
Survey 1977-78.
estimate the relative costs for a standard
list of foods.
In this study, large households did report
lower prices than small households. When
applied to a standard list of 425 foods,
prices reported by the largest households
with six persons or more resulted in a lower
total cost per person than did prices
reported by smaller households. The standard
list of foods for a person cost $12.64,
based on prices reported by households of
six or more persons, and $13. 77--an
additional 9 percent--for prices reported by
one-person households. The standard list of
foods cost 5 percent more when prices for
one-person h-ouseholds were compared to
two-person households.
The cost for the standard food list based
on prices reported by households of differ­ent
sizes follows:
Household size
(persons)
1 .............
2 .............
3 .............
4 .............
5 .............
6 or more •••••
Cost per person of
foods on list
Dollars Ratio1
13.77 1.09
13.11 1.04
212.90 1.02
2 12.83 1.02
12.81 1.01
12.64 1.00
1 Based on prices reported by households of
6 or more persons.
2Differences in dollar cost per person due
to rounding of ratio in table.
Data for 3,473 households from the spring
quarter of the survey were used as the basis
for the standard food list and the costs per
pound of food for households of different
sizes. In this survey, a trained interviewer
asked a household member what foods had
been used in the home during the previous
week, how much of each was used, and its
cost.
Procedures
Household size. For this study, house-hold
size was computed by totaling the num­ber
of meals eaten at home during the week
of the survey, adjusting the total for meals
skipped by household members, and dividing
by 21. 2 Standardizing the household size in
this way minimizes biases that would result
from the different proportions of food eaten
away from home by household members.
Furthermore, only those households with at
least one person having 10 or more meals
from the household food supply during the
7 days preceding the interview were used.
This minimizes biases that could be intro­duced
from households that do not plan, buy,
and serve at home a minimum number of meals
in a week.
Food list. The standard food list con-sisted
of 425 foods used by survey house­holds.
They were not specific as to brand,
container size, or quality of the food-­characteristics
not obtained in the survey.
These foods were used by one or more survey
households in all six household-size
categories. Those foods not used by at least
one household of each size were excluded
from the study so that price variations
caused by different selections of foods
would be eliminated. Quantities of the 425
foods in the standard list were the average
amounts reported used in a week by all
households regardless of size.
Prices. The average cost per pound of
food used, reported for each of the 425
foods, was calculated for each household-size
category. These prices then were mul­tiplied
by the quantity of the food on the
standard food list, and the costs (price X
quantity) for 19 food groups were totaled
(table 1). Average price per pound for each
of the 19 groups also was calculated (table 2).
Results
Generally, as household size increased,
the price per pound for each of the 19
food groups decreased. For 15 of these
groups, the price per pound reported by
one-person households was higher than that.
2 The total number of meals that would have
been eaten by a person eating all meals at
home during the week--three meals a day for
7 days.
1982 No.4 Family Economics Review 28
for any other household size (table 2). The
exceptions were poultry, fish, and shell­fish;
fresh fruits; and two relatively small
food groups--dried vegetables and fruits;
and soups, sauces, and gravies. Five-person
households paid the highest price per pound
for poultry, fish, and shellfish; and two­person
households paid the highest price per
pound for fresh fruits.
For 10 of the 19 food groups, households
of six or more persons used food at the
lowest price per pound (table 2). The food
groups that were the exceptions were eggs;
sugar and sweets; potatoes and sweetpotatoes;
fresh fruits; vegetables and fruit juices;
beverages; and the relatively small groups-­dried
vegetables and fruits; soups, sauces,
and gravies; and food mixtures. Five-person
households had the lowest price per pound for
most of the major exceptions--eggs; potatoes
and sweetpotatoes; fresh fruits; and
vegetables and fruit juices.
Table 1. Cost per person of food groups in standard food list 1
Household size (persons)2
Food group
1 2 3 4 5 6 or
more
Milk and milk products ••••••••••• $2.01 $1.92 $1.89 $1.86 $1.87 $1.83
Fats and oils ..................... .46 .44 .43 .42 .43 .42
Flour and cereal products ••••••••• • 50 .48 .47 .47 .46 .46
Bakery products •••••••••••••••••• • 98 .92 .89 .89 • 86 .83
Meat •••••••••••••••••••••••••••••• 3.33 3.15 3.14 3.10 3.03 3.02
Poultry, fish, and shellfish .61 .58 .61 • 59 .62 • 56
Eggs •••••••••••••••••••••••••••••• .33 • 33 .32 .32 .31 • 32
Sugar and sweets ••••••••••••••••• • 50 .47 .46 .45 .49 .46
Potatoes and sweet potatoes •••••••• • 34 .30 .29 .29 • 27 • 28
Fresh vegetables •••••••••••••••••• • 87 .81 .83 .84 .81 .79
Fresh fruits ...................... .67 .67 .65 .66 .64 .66
Commercially canned vegetables •••• • 39 • 38 .38 • 36 • 37 • 36
Commercially frozen vegetables •••• • 09 • 09 • 09 • 08 • 08 • 08
Vegetables and fruit juices ....... • 36 .35 • 34 .35 .32 .33
Dried vegetables and fruits ....... • 02 • 02 • 02 • 02 • 02 • 02
Beverages ......................... 1. 95 1.84 1.76 1. 80 1.84 1.90
Soups, sauces, and gravies ••••••• • 07 • 07 • 07 • 07 • 08 • 07
Nuts, peanut butter, and
condiments ....................... • 23 .21 .21 .20 .20 .19
Mixtures and baby food mixtures •• • 07 • 07 • 06 • 06 .07 • 07
Total 3 ...................... 13.77 13.11 12.90 12.83 12.81 12.64
1Average quantities of 425 foods used by survey households multiplied by average price
per pound reported by households of different sizes 2 •
21 meals at home during a week equals 1 person.
3Totals may not add up because of rounding.
Source: USDA's Nationwide Food Consumption Survey 1977-78, 48 conterminous states,
spring 1977.
29 Family Economics Review 1982 No.4
Of all the food groups, the greatest
differences in prices between the smallest
and the largest households were for bakery
products; potatoes and sweetpotatoes;
commercially frozen vegetables; and nuts,
peanut butter, and condiments (table 3). The
price per pound of these foods for one-person
households was higher than for households of
six or more persons ( 17 pet or more). In
fact, prices of potatoes and sweetpotatoes
showed the greatest difference, with prices
of one-person households 22 percent higher
than those for six-person households and 12
percent higher than for two-person
households.
Care must be taken when drawing conclu­sions
about price differentials from this
study. Food prices are affected by such
factors as the availability, quality, and
brand of the food, as well as the size of the
market unit. The foods and prices available
to households surveyed were not consistent,
and the food choices households made were
affected by many factors. For example, many
large households must manage on tighter food
budgets than smaller households. As a result,
they may have selected less expensive brands
and possibly lower quality foods. Since the
Nationwide Food Consumption Survey did not
collect information on food prices by brand
and quality of the food, this study could not
discount the effect that these influences may
have had.
Table 2. Price1 per pound of food groups in standard food list2
Food group
Milk and milk products ••••••••••••••
Fats and oils •••••••••••••••••••••••
Flour and cereal products •••••••••••
Bakery products ••••••••••••••••••••
Meat ••••••••••••••••••••••••••••••••
Poultry, fish, and shellfish
Eggs ••••••••••••••••••••••••••••••••
Sugar and sweets ................. .
Potatoes and sweetpotatoes ••••••••••
Fresh vegetables ••••••••••••••••••••
Fresh fruits ....................... .
Commercially canned vegetables ••••••
Commercially frozen vegetables ••••••
Vegetables and fruit juices •••••••••
Dried vegetables and fruits •••••••••
Beverages . ......................... .
Soups, sauces, and gravies ••••••••••
Nuts, peanut butter, and
condiments ...........•.............
Mixtures and baby food mixtures ••••
1
$0.312
• 724
• 580
.659
1.308
.828
• 527
• 571
.278
.414
.270
.404
.664
• 362
1.276
• 559
.481
.782
.967
Household size (persons) 3
2 3 4
$0.298 $0.293 $0.288
.690 .670 .659
.552 .548 .542
.624
1. 240
.799
.514
• 537
• 247
.389
• 273
.395
.636
.346
1.098
.529
.456
.733
.910
.604
1. 232
.829
• 500
.529
.237
.397
• 263
.390
.649
.343
1.080
• 506
.438
.724
.822
.602
1.220
.802
.501
• 522
.235
• 399
• 268
.376
.620
.344
1.172
• 517
.469
.710
.812
5
$0.291
.672
.537
• 583
1.192
.852
.494
• 564
.226
.386
• 261
• 385
.610
.323
1.402
.530
• 506
.685
.954
1Average prices reported by households of different sizes.
6 or
roore
$0.284
.654
.527
• 558
1.188
.769
.503
• 526
.228
.378
• 268
• 369
• 561
.330
1.259
• 545
.455
.671
.892
2List of 425 foods used by 1 or more survey households of each size category. Quantities
of each food in list are average amounts reported by all households regardless of size.
321 meals at home during a week equals 1 person.
Source: USDA's Nationwide Food Consumption Survey 1977-78, 48 conterminous States,
spring 1977.
1982 No.4 Family Economics Review JO
Table 3. Index of price 1 per pound of food groups in standard food list 2
[Price for households of 6 or more persons = 100]
Food group
Milk and milk products ••••••••••••••
Fats and oils ••••••••••••••••••.•••.
Flour and cereal products •••••••••••
Bakery products ••••••••••••••••••••
Meat ••••••••••••••••••••••••••••••••
Poultry, fish, and shellfish
Eggs •••••••••••••••••••••••.••••••.•
Sugar and sweets •••••••••••••••••••
Potatoes and sweetpotatoes ••••••••••
Fresh vegetables ••••••••••••••••••••
Fresh fruits ....................... .
Commercially canned vegetables •••••
Commercially frozen vegetables ••••••
Vegetables and fruit juices •••••••••
Dried vegetables and fruits •••••••••
Beverages .......................... .
Soups, sauces, and gravies •••••••••
Nuts, peanut butter, and
condiments ...............•.•.......
Mixtures and baby food mixtures ••••
1
110
111
110
118
110
108
105
109
122
110
101
110
118
110
101
103
106
117
108
Household size (persons) 3
2
105
106
105
112
104
104
102
102
109
103
102
107
113
105
87
97
100
109
102
3
103
103
104
108
104
108
100
101
104
105
98
106
116
104
86
93
96
108
92
4
101
101
103
108
103
104
100
99
103
106
100
102
110
104
93
95
103
106
91
5
103
103
102
105
100
111
98
107
99
102
97
104
109
98
111
97
111
102
107
6 or
more
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Average prices reported by households of different sizes.
2List of 425 foods used by 1 or more survey households of each size category. Quantities
of each food in list are average amounts reported by all households regardless of size.
3 21 meals at home during a week equals 1 person.
Source: USDA's Nationwide Food Consumption Survey 1977-78, 48 conterminous States,
spring 1977.
Some New USDA Publications
The following are for sale by the Super­intendent
of Documents, U.S. Government
Printing Office, Washington, D.C. 20402:
•
1981 YEARBOOK OF AGRICULTURE:
WILL THERE BE ENOUGH FOOD?
EATING FOR BETTER HEALTH •
PA 1290. August 1981.
:51 Family Economics Review 1982 No.4
ENERGY RESEARCH FOR THE FARM:
AN OVERVIEW. AlB 447. February
1982.
FACT BOOK OF U.S. AGRICULTURE.
M 1063. Revised November 1981.
FOODS COMMONLY EATEN BY
INDIVIDUALS: AMOUNT PER DAY
AND PER EATING OCCASION.
HERR 44. March 1982.
Final Report on Urban Family
Budgets
The Bureau of Labor Statistics has updat­ed
to autumn 1981 its three hypothetical
annual budgets for an urban family and the
comparative indexes for selected urban areas
(see box). This updating reflects changes in
prices and personal taxes from autumn 1980
to autumn 1981. In autumn 1981, the U.S.
average cost · of the lower budget for an
urban family of four was $15, 323 a year; the
intermediate level, $25,407; and the higher
level, ·$38, 060 (see table). These budgets
represent an increase in cost of the total
budget over autumn 1980 of 9.1 percent for
the lower budget, 9.8 percent for the inter­mediate
budget, and 10.6 percent for the
higher budget. These increases were approxi­mately
3 percentage points less than those
in 1980, reflecting smaller increases in
food and personal income taxes.
Personal income taxes and social security
deductions showed the largest increases and
clothing the smallest increase. Personal
income taxes ro~e more at the lower budget
level; however, the impact of the increases
The Bureau of Labor Statistics (BLS)
is discontinuing the issuance of the
urban family budgets. The updated
autumn 1981 budgets for an urban
family of four at three levels of living
is the final release. According to BLS,
funding was not available for the nec­essary
revisions and updating of the
20-year-old expenditure data that was
used as the base for the budgets.
is more pronounced at the higher levels be­cause
taxes constitute a larger share of the
total budget at these levels. As a result of
increases in the payroll deduction rate
(from 6.13 to 6.65 pet) and the raising of
the earning ceiling on contributions, the
higher budget had the largest increase in
social security deductions. Among consump­tion
components, transportation costs showed
the largest increases at all three levels.
Medical care costs also showed large
increases from 1980 to 1981.
The budgets represent the costs of three
hypothetical lists of goods and services
Annual budgets for a 4-person family at 3 levels of living, urban United States, autumn 1981
Component
Total budget .............•..........
Total family consumption ••••••••
Food •...•..•...•..•..••.......
Housing ..•....................
Transportation ••••••••••••••••
Clothing ..................... .
Personal care •••••••••••••••••
Medical care .....•.........•..
Other family consumption ••••••
Other items .................... .
Social security and disability •••
Personal income taxes •••••••••••
Lower
$15,323
12,069
4, 545 -
2,817
1, 311
937
379
1,436
644
621
1,036
1,596
Intennediate
$25,407
18,240
5,843
5,546
2, 372
1,333
508
1,443
1,196
1,021
1,703
4,443
Higher
$38,060
25,008
7,366
8,423
3, 075
1,947
719
1,505
1, 972
1, 718
1,993
9, 340
Sources: U.S. Department of Labor, Bureau of Labor Statistics, 1982: Autumn 1981 urban -·
family budgets and comparative indexes for selected urban areas, NEWS USDL 82-139; Family
budgets, Monthly Labor Review 105(7) :44-46.
1982 No.4 Family Economics Review J2
that were specified in the midsixties to
portray three relative standards of living.
The hypothetical urban family of four is
defined as a 38-year-old husband employed
full time, a nonworking wife, a boy of 13,
and a girl of 8.
Sources: U.S. Department of Labor, Bureau
of Labor Statistics, 1982: Autumn 1981 urban
family budgets and comparative indexes for
selected urban areas, News USDL 82-139;
Family budgets, Monthly Labor Review
105(7):44-46.
LABSTAT Data File Available
The Bureau of Labor Statistics has estab­lished
the LABSTAT (Labor Statistics) Data
Base containing time series data generated
by the Bureau's statistical surveys and pro­grams.
Individual data files from LABSTAT
are now available through National Technical
Information Service and may be purchased as
a one-time order or as an annual subscrip­tion.
Titles include: Labor Force--National;
Industry Employment, Hours, and Earnings-­National;
Industry Employment, Hours, and
Earnings--State and Area; Unemployment and
Labor Force--State and Area; Industry Labor
Turnover--National; Consumer Price Index;
Producer Price Index; Imports--by 1972
Standard Industrial Classification;
Imports--by Tariff Commodity Class; and
Export and Import Price Indexes.
Standard format for these tapes is 9-
track, 1600 bpi. For further information
contact Stuart M. Weisman, National Tech­nical
Information Service, u.s. Department
of Commerce, 5285 Port Royal Road,
Springfield, Va. 22161, (703) 487-4808.
JJ Family Economics Review 1982 No.4
Current Research Projects
CONSEQUENCES OF ENERGY CONSERVATION
POLICIES FOR WESTERN REGION
HOUSEHOLDS
Project Number: W-159 (Regional)
Contact Person:
Carole J. Makela
Department of Consumer Sciences and Housing
College of Home Economics
Colorado State University
Fort Collins, Colo. 80523
303-491-5141
Cooperating States:
Arizona, California, Colorado, Idaho,
Montana, 1 Nevada, Oregon, Pennsylvania,
Utah, Washington, Wyoming
Starting Date: October 1980
Termination Date: September 1985
Objectives:
To describe the acceptability of home­related
energy conservation policies and
practices by rural and urban households in
the western region.
To determine the effects of housing char­acteristics,
current energy use, demographic
characteristics, household lifestyles, geo­graphic
location, and energy knowledge on
the acceptability of energy conservation
policies and practices.
To monitor changes in energy conservation
practices over time and identify the factors
related to their occurrence.
Findings:
Limited analyses of the preliminary
regional data set suggest that:
1. People prefer the major emphasis of
U.S. energy policy to be directed toward
their homes as opposed to private transpor­tation
or the production section of the
economy. Tax credits for energy-conserving
improvements are popular.
1 Montana withdrew from project in July
1981.
2. Since attitudes of people are con­sistent
across States, individual State
approaches to energy conservation are
probably unnecessary.
Selected Regional Publications:
1. Dillman, Don A., Patricia A. Tripple,
Carole J. Makela, Joye J. Dillman, and LaRae
B. Chatelain. [In press.] A western State's
perspective on public policy for household
energy cons~rvation. Housing and
Society: Journal of the American Association
of Housing Educators 8(2)80-92.
2. Makela, Carole J., LaRae B. Chatelain,
Don A. Dillman, J oye J. Dillman, and
Patricia A. Tripple. [In press.] Energy
Directions for the United States: A Western
Perspective. WRDC Publication No. 13.
Western Rural Development Center, Corvallis,
Oreg.
HOUSING FOR LOW- AND MODERATE-INCOME
FAMILIES
Project Number: S-141 (Regional)
Contact Person:
E. N. Boyd
Virginia Polytechnic Institute
and State University
Blacksburg, Va. 24061
703-961-6986
Cooperating States:
Alabama, Arkansas, Florida, Georgia,
Kentucky, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas, Virginia
Starting Date: October 1979
Termination Date: September 1984
Objectives:
Provide innovative designs and technical
assistance for the construction of prototype
housing systems and subsystems and review
and evaluate them by interdisciplinary
teams.
Analyze societal constraints to the
adoption of housing alternatives, including
those of finance, cost, regulations,
policies, land use, and energy use.
Analyze existing and innovative delivery
systems for producing, marketing, and
financing housing to maximize accessibility
of quality housing.
Analyze constraints within the family to
the adoption of housing alternatives, includ­ing
demographic characteristics, family
resources, family decisionmaking processes,
and consumer acceptance.
Develop effective methods of disseminating
housing research information to consumers
and key decisionmakers in the area of
housing.
Progress and Findings:
Prototypes of more than 50 energy effi­cient
housing designs (passive solar, solar
attic, greenhouse, earth-sheltered, and
modular solar) have been built by personnel
of the Tennessee Valley Authority and South
Carolina--USDA/SEA/CR--Rural Housing
Research Unit. Additional designs are in
progress and benchmark design criteria
against which innovative designs can be
measured are being developed.
Attitudes of housing intermediaries impact
policies that both constrain and facilitate
the adoption of alternative housing. It is
important that research results be dissem­inated
to educators and policymakers
associated with housing.
Selected Publications:
1. McCray, Jacquelyn W. 1981. Passive
solar and earth-sheltered. residential
designs: Reactions of housing intermediaries
samples. Arkansas Farm Research 30(4): 13.
Agricultural Experiment Station.
2. and Sandra E. Brubaker.
1981. Earth-Sheltered Housing: The What and
the Why. Arkansas Agricultural Experiment
Special Report Series No. 100.
3. and Margaret Weber. 1981.
Factors affecting the diffusion of two
energy efficient innovative housing systems.
Special energy issue. Housing and Sodety: -
Journal of the American Association of
Housing Educators 8(2)93-98.
1982 No.4 F·amily Economics Review J4
Updated Estimates of the Cost of Raising a Child
The coat of raising urban children: June 1982 1
Region and
age of child
(years)
NORTH CENTRAL:
Under 1 •••••••••
1 ••••••••••••••••
2-3 ••••••••••••••
4-5 ••••••••••••••
6 ••••••••••••••••
7-9 ••••••••••••••
10-11 ••••••••••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total ••••••••••
NORTHEAST:
Under 1 •••••••••
1 ••••••••••••••••
2-3 ••••••••••••••
4-5 ••••••••••••••
6 ••••••••••••••••
7-9 ••••••••••••••
10-11 ••••••••••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total
SOUTH:
Under 1 •••••••••
1 .............. ..
2-3 ............ ..
4-5 ••••••••••••••
6 ............... .
7-9 ............ ..
10-11 ••••••••••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total
WEST:
Under 1 ••••.••••
1 ............... .
2-3 ............. .
4-5 ............. .
6 .............. . .
7-9 ••••••••••••••
10-11 •••• ••• •••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total ••••••••••
Total
$3,991
4,115
3,832
4, 060
4,212
4, 385
4,559
4,870
4,994
5,484
81,195
3,966
4,115
3,999
4, 227
4, 508
4,681
4, 904
5,207
5,356
5,748
85,663
4,341
4,465
4,181
4,384
4,615
4,763
4,962
5,287
5,435
5,846
88,048
4,274
4,423
4,188
4,442
4,743
4,916
5,139
5,425
5, 549
6,092
89.982
$545
669
669
768
743
916
1,090
1,115
1,239
1,387
17.365
644
793
768
867
867
1, 040
1,263
1,263
1,412
1, 561
19,841
594
718
694
768
768
916
1,115
1,115
1, 263
1,387
17,660
594
743
718
817
793
966
1,189
1,189
1,313
1,486
18,576
Food
away
fran
bane
$0
0
0
129
129
129
129
155
155
155
1, 962
0
0
0
129
155
155
155
155
155
180
2,168
0
0
0
129
155
155
155
180
180
180
2,268
0
0
0
155
180
180
180
180
180
206
2,522
Clothing
$131
131
212
212
294
294
294
425
425
588
5, 750
131
131
229
229
310
310
310
457
457
572
6,010
147
147
229
229
310
310
310
457
457
588
6,074
131
131
212
212
310
310
310
441
441
555
5,844
Housing 3 Medical
care
$1,762
1, 762
1, 549
1, 549
1,469
1,469
1,469
1,522
1,522
1, 575
27.772
1,789
1,789
1,629
1,629
1,602
1,602
1,602
1,655
1,655
1,682
29,690
1,896
1,896
1,682
1,682
1,602
1,602
1,602
1,655
1,655
1, 709
30,170
1,842
1, 842
1,655
1,655
1,629
1,629
1,629
1,682
1,682
1,762
30,330
$242
242
242
242
242
242
242
242
242
242
4, 356
242
242
242
242
242
242
242
242
242
242
4,356
269
269
269
269
269
269
269
269
269
269
4,842
296
296
296
296
296
296
296
296
296
296
5,328
Educa­tion
$0
0
0
0
104
104
104
104
104
104
1, 248
0
0
0
0
130
130
130
130
130
130
1, 560
0
0
0
0
156
156
156
156
156
156
1,872
0
0
0
0
130
130
130
130
130
130
1, 560
Transpor- All
tation other•
$810
810
706
706
706
706
706
758
758
836
13,384
706
706
653
653
653
653
653
732
732
784
12,438
862
862
758
758
758
758
758
810
810
888
14. 320
862
862
758
758
784
784
784
862
862
941
14. 790
$501
501
454
454
525
525
525
549
549
597
9, 358
454
454
478
478
549
549
549
573
573
597
9,600
573
573
549
549
597
597
597
645
645
669
10,842
549
549
549
549 .
621
621
621
645
645
716
11,032
1Annual cost of raising a child from birth to age 18, by age, in a husband-wife family with no more than 5 children,
spending at the moderate oost level. For more information on these and additional child cost estimates, see USDA
Miscellaneous Publication No. 1411 by Carolyn s. Edwards, "USDA Estimates of the Cost of Raising a Child: A Guide to
Their Use and Interpretation." This publication is for sale by the U.S. Government Printing Office, Washington, D.C.
20402.
2 Includes home-produced food and school lunches.
3 Includes shelter, fuel, utilities, household operations, furnishings, and equipment.
"Includes personal care, recreation, reading, and other miscellaneous expenditures.
35 Family Economics Review 1982 No.4
The cost of ralslng rural nonfarm children: June 1982 1
Region and
age of child
(years)
NORTH CENTRAL:
Under 1 ........ .
1 . • ••••••••••••••
2-3 ••••••• ; ••••••
4-5 ••••••••••••••
6 ••••••••••••••••
7-9 ••••••••••••••
10-11 ••••••••••••
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total •••• , , •• , •
NORTHEAST:
Under 1 •••• , .. ..
1 .............. ..
2-3 ............. .
4-5 ••••••••••••••
6 .............. ..
7-9 ••••••••••••••
10-11 ••••••••••••
12 .............. .
13-15 ••••••••••••
16-17 ••••••••••••
Total
SOUTH:
Under 1 ....... ..
1 .............. ..
2-3 ••••••••••••••
4-5 ••••••••••••••
6 ............... .
7-9 ••••••••••••••
10-11 ••••••••••••
12 •••••••••••••••
13-15 .......... ..
16-17 .......... ..
Total
WEST:
Under 1 ........ ,
1 .............. ..
2-3 ••••••••••••••
4-5 ••••••••••••••
6 .............. ..
7-9 ••••••••••••••
10-11 ........... .
12 •••••••••••••••
13-15 ••••••••••••
16-17 ••••••••••••
Total •••••• , •••
Total
$3,771
3,895
3,463
3,666
3,941
4, 089
4, 287
4,614
4,738
5,090
75,714
4, 375
4,499
4, 293
4,547
4,847
4, 995
5,218
5,535
5,684
6,185
91,779
4, 524
4,624
4,183
4,437
4, 591
4, 740
4,938
5,308
5,432
5,904
8,487
4,681
4,805
4,339
4, 593
4,912
5, 085
5,283
5,650
5,799
6, 365
93,860
Food
at
hcme 2
$495
619
594
694
694
842
1, 040
1, 040
1,164
1,288
16.098
594
718
694
793
793
941
1,164
1,164
1,313
1,461
18,255
594
694
669
768
743
892
1,090
1, 090
1,214
1, 362
17.217
594
718
694
793
768
941
1,139
1,139
1,288
1,461
18,080
Food
away
fran
hane
$0
0
0
103
129
129
129
129
129
155
1,806
0
0
0
155
180
180
180
180
180
206
2,522
0
0
0
155
155
155
155
180
180
206
2,372
0
0
0
155
155
155
155
180
180
206
2,372
Clothing
$114
114
180
180
278
278
278
425
425
523
5,362
131
131
212
212
310
310
310
474
474
621
6,108
147
147
229
229
310
310
310
474
474
670
6,306
131
131
212
212
327
327
327
490
490
572
6,176
Housing 3 Medical
$1,682
1,682
1,415
1,415
1,388
1,388
1,388
1,442
1,442
1,469
26,058
1,896
1,896
1,736
1,736
1,709
1,709
1, 709
1, 762
1, 762
1,816
31,670
1,896
1,896
1,629
1,629
1,575
1, 575
1,575
1,629
1,629
1,655
29,584
1,922
1,922
1,655
1,655
1,629
1,629
1,629
1,682
1,682
1,789
30,544
care
$242
242
215
215
215
215
215
215
215
242
3,978
242
242
242
242
242
242
242
242
242
242
4,356
269
269
269
269
269
269
269
269
269
269
4,842
296
296
269
269
296
296
296
296
296
296
5,220
Educa­tion
$0
0
0
0
104
104
104
104
104
104
1,248
0
0
0
0
156
156
156
156
156
156
1,872
0
0
0
0
130
130
130
130
130
130
1, 560
0
0
0
0
156
156
156
156
156
156
1,872
Transpor- All
tation other'
$784
784
653
653
679
679
679
758
758
784
12,854
915
915
836
836
836
836
836
888
888
967
15,676
1, 045
1, 045
862
862
836
836
836
915
915
967
16,148
1,045
1,045
888
888
888
888
888
967
967
1,097
17.032
$454
454
406
406
454
454
454
501
501
525
8,310
597
597
573
573
621
621
621
669
669
716
11,320
573
573
525
525
573
573
573
621
621
645
10,458
693
693
621
621
693
693
693
740
740
788
12, 564
1Annual cost of raising a child from birth to age 18, by age, in a husband-wife family with no more than 5 children,
spending at the moderate cost level. For more information on these and additional child cost estimates, see USDA
Miscellaneous Publication No. 1411 by Carolyn S. Edwards, "USDA Estimates of the Cost of Raising a Child: A Guide to
Their Use and ~nterpretation." This publication is for sale by the U.S. Government Printing Office, Washington, D.C.
20402.
2 Includes home-produced food and school lunches.
3 Includes shelter, fuel, utilities, household operations, furnishings, and equipment.
'Includes personal care, recreation, reading, and other miscellaneous expenditures.
1982 ~•o. 4 Family Economics Review )6
.... ......
...,
II)
3... ..
.....
'<
1"'1
0
0
::l
0
3... ..
()
co
;:.,
co
.<... .
co
~
"CD'
N ..
0
t:>
Cost of food at home estimated for food plans at 4 cost levels, June 1982, U.s. average 1
Cost for 1 week Cost for 1 Ironth
Sex-age groups
Thrifty Low-cost Moderate- Liberal Thrifty Low-cost Moderate- Liberal
plan 2 plan cost plan plan Qlan plan cost plan plan
FAMILIES
Family of 2: 3
20-54 years •••••••••••••••
55 years and over •••••••••
Family of 4:
Couple, 20-54 years and
children--
1-2 and 3-5 years •••••••
6-8 and 9-11 years ••••••
INDIVIDUALS 4
Child:
7 months to 1 year ••••••••
1-2 years ................ .
3-5 years ................ .
6-8 years ••.•••••••••••.••
9-11 years ••••••••••••••••
Male:
12-14 years •••••••••••••••
15-19 years •••••••••••••••
20-54 years •••••••••••••••
55 years and over •••••••••
Female:
12-19 years •••••••••••••••
20-54 years •••••••••••••••
55 years and over ••••••••
Pregnant ••••••••••••••••••
Nursing .................. .
$34.50
31.10
48.90
59.00
7.00
7.90
9.60
12.20
15.40
16.30
17.90
17.30
15.40
14.50
14.10
12.90
17.60
18.70
44.80
40.00
62.70
75.80
8.50
10.00
12.00
15.60
19.50
20.70
22.90
22.50
19.90
18.50
18.20
16.50
22.40
23.80
56.10
49.50
78.20
95.00
10.30
12.40
14.80
19.50
24.50
25.90
28.60
28.40
24.70
22.90
22.60
20.30
27.70
29.60
67.30
59.20
93.70
113.90
12.20
14.70
17.80
23.40
29.30
31.00
34.40
34.20
29.70
27.30