Fed Official Says Proposal Could Raise Loan Costs

American Banker (02/05/08) P. 9; Berry, Kate
The cost of mortgages could increase as a result of a rule proposed by central bankers that would require lenders to size up the ability of a prospective borrower to repay a loan, according to Federal Reserve Board Gov. Randall Kroszner. Speaking at the American Securitization Forum conference on Feb. 4, Kroszner said the possibility of consumer actions, in addition to an effort to avoid prescribing qualitative underwriting thresholds, could heighten compliance and litigation risk. "In turn, this could raise the cost of credit for higher-risk borrowers or limit the availability of responsible credit," he explained. The public has until April 9 to comment on the proposal--which was issued in December and could take effect in 2009.