Bernanke Is Now Going To Be An Underwriter???

With all the hub bub going on regarding whose fault it is that the subprime market imploded Senator Christopher Todd (D Connecticut) is suggesting that the Fed make up the new rules for sub prime guidelines.  I disagree.  The final decision still should be responsible underwriters and loan originators.  As true professional sales people, everyone in the mortgage business needs to simply do the right thing and actually tell a potential client "unfortunately you don't qualify for a loan at this time".  Work with that client until they do qualify and then write the loan.  I think if WE all do our job, then we won't have to worry if the Fed is going to start making our guidelines.

Below is an exerpt from Bloomberg.com titled Bernanke Says Subprime Curbs to Hurt Housing Market:

``The practice of selling mortgages to investors may have contributed to the weakening of underwriting standards,'' Bernanke said.

At the urging of Congress, the Fed and other regulators issued a proposed guidance on prudent lending standards on subprime loans. Such guidance letters typically increase the focus on these products during routine bank examinations. Officials published the proposed guidance March 8.

``Given what we know now, yes, we could have done more sooner,'' Cole, the Fed's director of banking supervision, told the Senate Banking Committee at a March 22 hearing.

Democratic Senator Christopher Dodd of Connecticut, who chairs the committee, and nine other members asked Bernanke to use the Fed's legal authority to issue tighter regulations against predatory lending, such as prohibiting loans that would eat up more than 50 percent of a borrower's income.

``Effective disclosures should be the first line of defense against improper lending,'' he said. ``Guidance can be modified as needed to apply to different situations.''

Consumer advocates criticize the Fed's preference for disclosure because many low-income borrowers lack financial literacy. Disclosures are also often written by lawyers with a focus on liabilities rather than consumer education.