From the AP via SF Gate:

Chairman Ben Bernanke and his central bank colleagues approved a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest “subprime” borrowers

The the plan would:

  • bar lenders from making loans without proof of a borrower’s income.
  • require lenders to make sure risky borrowers set aside money to pay for taxes and insurance.
  • restrict lenders from penalizing risky borrowers who pay loans off early. Such “prepayment” penalties are banned if the payment can change during the initial four years of the mortgage. In other cases, a penalty can’t be imposed in the first two years of the mortgage.
  • prohibit lenders from making a loan without considering a borrower’s ability to repay a home loan from sources other than the home’s value. The borrower need not have to prove that the lender engaged in a “pattern or practice” for this to be deemed a violation. That marks a change — sought by consumer advocates — from the Fed’s initial proposal and should make it easier for borrowers to lodge a complaint.
  • lenders will have to credit a mortgage payment to the homeowner’s account on the day it is received.
  • brokers and others are forbidden from “coercing or encouraging” an appraiser to misrepresent the value of a home.

Fed adopts plan to curb shady mortgage practices [SF Gate]
Subprime For Dummies [SF Schtuff]

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