After hte FED fixes the mortgage abuses they need to deal with the Credit Card abuses

December 15, 2007

Fed Taking on Abusive Lending Practices

By THE ASSOCIATED PRESS

Filed at 4:48 p.m. ET

WASHINGTON (AP) -- People taking out home mortgages may gain new protections

soon against shady lending practices as the Federal Reserve seeks to back

even the riskiest borrowers, already hit hardest by the housing and credit

crunches.

Rules expected to be proposed Tuesday would apply to loans made by all types

of lenders, including banks and brokers. The plan from the Fed, which has

regulatory powers over the nation's financial system, could be finalized

next year. The effective date would be know then.

The Fed is considering:

==barring lenders from penalizing subprime borrowers -- those with spotty

credit or low incomes -- who pay their loans off early.

==forcing lenders to make sure that borrowers, especially subprime

borrowers, set aside money to pay for taxes and insurance.

==restricting loans that do not require proof of a borrower's income.

==examining lenders' failure, in some cases, to consider a borrower's

ability to repay a home loan.

==improving financial disclosure so people better understand the terms and

conditions of their mortgages and get this information when it is most

useful.

==curtailing abuses in mortgage advertising.

''We have an obligation to prevent fraud and abusive lending,'' the Fed

chairman, Ben Bernanke, said earlier this year. ''At the same time, we must

tread carefully so as not to suppress responsible lending or eliminate

refinancing opportunities for subprime borrowers.'

The issue has taken on heightened importance given the meltdown in the

housing and credit markets that has led to record numbers of home

foreclosures. The crisis has raised the odds that the economy might fall

into a recession, roiled Wall Street and has given Democrats and Republicans

much fodder to blame each other.

On prepayment penalties, consumer advocates say these deter homeowners from

refinancing on more favorable terms. Those penalties can be hard on

borrowers who want to get out of adjustable-rate mortgages that reset from a

low introductory rate to a much higher one they have trouble paying off.

Mortgage industry representatives say prepayment penalties ensure that

lenders receive a minimum return if loans are paid off early. They also say

people with mortgages that include such penalties often get a benefit of

lower upfront costs or lower interest rates.

Of the nearly 3 million subprime adjustable-rate loans surveyed by the

Mortgage Bankers Association from July through September, a record 4.72

percent entered the foreclosure process during those months. At the same

time, a record 18.81 percent of the subprime adjustable-rate loans were

past due .

When home values weakened, borrowers were left with loans balances that

eclipsed the value of their homes. They also were clobbered when their loans

reset with much higher interest rates.

As for the idea of setting aside money to cover taxes and insurance,

consumer groups worry that subprime borrowers do know about these expenses

or might not be able to budget for them. These groups also have raised

concerns about lenders quoting subprime borrowers monthly payments that do

not include taxes and insurance costs.

The Mortgage Bankers Association has some problems with mandating escrow

accounts -- where those costs specifically are set aside each month -- for

borrowers. The association does support efforts to make sure borrowers have

the appropriate information about their obligations to pay taxes and

insurance.

The Fed says loans to subprime borrowers typically do not include such an

account, while loans to people with better credit and lower risk to the

lender usually do.

The central bank also says that lenders sometime will make a loan without

documenting or verifying a borrower's income. Lenders may charge higher

rates for such loans, the Fed says.

Mortgage lenders say these loans are appropriate for many borrowers,

including those who are self-employed and cannot easily document their

income. Consumer groups say many borrowers who could document their income

are not aware they are getting a loan at a higher interest rate. These loans

are sometimes called ''liar's loans'' because critics believe they can be

used to perpetrate fraud.

Majority Democrats in Congress have been vocal in urging the Fed to act

against abusive practices.

Massachusetts Rep. Barney Frank, chairman of the House Financial Services

Committee, and other House Democrats said in a recent letter to the Fed that

tougher rules are overdue and ''needed to help eliminate the kinds of

predatory lending practices that exacerbated the current subprime lending

crisis.''

The House has passed legislation that would put into law some of the same

actions the Fed is considering. A similar bill is pending in the Senate.

Supporters are heartened the Fed is moving ahead because they think the Fed

might be able to finalize action before Congress does.

The Fed was the biggest abuser by offering a variable teaser rate and

then raising the rate.

Sid9 wrote:

> December 15, 2007

> Fed Taking on Abusive Lending Practices

> By THE ASSOCIATED PRESS

> Filed at 4:48 p.m. ET

>

> WASHINGTON (AP) -- People taking out home mortgages may gain new protections

> soon against shady lending practices as the Federal Reserve seeks to back

> even the riskiest borrowers, already hit hardest by the housing and credit

> crunches.

>

> Rules expected to be proposed Tuesday would apply to loans made by all types

> of lenders, including banks and brokers. The plan from the Fed, which has

> regulatory powers over the nation's financial system, could be finalized

> next year. The effective date would be know then.

The Fed can't fix this mess; they caused it by loaning money at

ridiculously low rates to stimulate the economy after 9/11.

Just shows that you can't trust gummint with your dollars.

<SNIP>

--

Cheers,

Bama Brian

Libertarian

Bama Brian wrote:

> Sid9 wrote:

>> December 15, 2007

>> Fed Taking on Abusive Lending Practices

>> By THE ASSOCIATED PRESS

>> Filed at 4:48 p.m. ET

>>

>> WASHINGTON (AP) -- People taking out home mortgages may gain new

>> protections soon against shady lending practices as the Federal

>> Reserve seeks to back even the riskiest borrowers, already hit

>> hardest by the housing and credit crunches.

>>

>> Rules expected to be proposed Tuesday would apply to loans made by

>> all types of lenders, including banks and brokers. The plan from the

>> Fed, which has regulatory powers over the nation's financial system,

>> could be finalized next year. The effective date would be know then.

>

> The Fed can't fix this mess; they caused it by loaning money at

> ridiculously low rates to stimulate the economy after 9/11.

>

> Just shows that you can't trust gummint with your dollars.

>

> <SNIP>

You've got it wrong.

You can't excuse the

banks that got the

government to

deregulate them.

Then the pigs went

to work and wrecked

everything for their

personal gain.

Private corporations

are at fault, not the

government

People need to just stop buying anything on credit except for a

house. And even there, we should mandate a down payment of 25%.