Fed Looks to Protect Homebuyers From Shady Lending Tactics

Seattle Times (07/14/08); Aversa, Jeannine
On July 14, the Federal Reserve likely will okay rules proposed at the end of last year to curtail predatory subprime lending. Among other provisions, the rules will ban prepayment penalties, mandate that money be placed in escrow for homeowners insurance and property taxes, enhance financial disclosures and require lenders to take borrowers' repayment ability into account and verify their incomes. In a document submitted to the central bank, the Mortgage Bankers Association cautions that "[overly broad rules] could prevent many lenders from making loans to those borrowers most in need of credit and significantly increase the cost of credit for all borrowers."