Federal Reserve to Rein in Mortgage Lenders
reports, and wire, Tribune-Review/Pittsburgh Tribune-Review
Federal regulators are putting the final touches on new rules designed to curb irresponsible mortgage lending and help some struggling homeowners refinance into more affordable loans.
On Monday, the Federal Reserve is expected to require lenders to document borrowers' incomes and verify that they can afford their mortgage payments -- including the higher payments that come when adjustable rate loans reset.
"These new rules, which will apply to all lenders and not just banks, will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending," Federal Reserve Chairman Ben Bernanke said at a conference this week.
First proposed in December, the measures have been revised in recent months in response to public comment. Fed officials declined to describe the changes, but the regulations are also expected to limit bonuses paid to brokers for making subprime loans and restrict prepayment penalties for borrowers who want to refinance.
Bernanke said the central bank would proceed with plans to tighten lending requirements for subprime loans, which carry higher interest rates because of the higher credit risk they pose to lenders.
Some of those new rules also may include restrictions on the use of the word "fixed" to describe the rate of a loan that may adjust in the future and prohibitions on brokers influencing the appraised value of homes.
Lenders may also be required to give borrowers at least 60 days before their loan rate resets in which they can refinance without penalty.
Pennsylvania Gov. Edward G. Rendell this week signed a package of laws designed to provide additional protection for consumers.
They require loan salespeople to be licensed by the Department of Banking and allow the department to more quickly inform the public about enforcement activities against mortgage companies.
In addition, mandatory education and licensure is now required for all mortgage originators in the state as well as education and an exam for one officer working for each licensee. …