What act preempted states from limiting loans to only fixed-rate products?

The Alternative Mortgage Transaction Parity Act (AMTPA) is the legislation that allows lenders to offer a variety of mortgage products, including adjustable-rate mortgages (ARMs), without being restricted by state laws that may limit loan options to fixed-rate products. This act was designed to create a more competitive marketplace for mortgage loans and to provide consumers with access to a broader range of financing options that could accommodate different financial situations and preferences.

By preempting state restrictions on loan types, the AMTPA enables lending institutions to innovate and offer loans that may better meet the needs of borrowers, particularly in changing economic conditions. For instance, adjustable-rate mortgages may provide lower initial payments that could attract buyers who might otherwise be unable to afford a home with a fixed-rate mortgage at the prevailing market rates.