In order to prevent a repeat or continuation of the current mortgage crisis resulting in record high foreclosures, the Feds are adopting rules that will inhibit the use of shady or unethical lending practices for future homebuyers.
Fed Chairman Ben Bernanke stated, "These new rules... will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending." The plan applies to new loans made by all types of lenders, both brokers and banks. The rules would:
- Restrict lenders from penalizing risky borrowers who pay loans off early.
- Require lenders to make sure these borrowers set aside money to pay for taxes and insurance.
- Bar lenders from making loans without proof of a borrower's income.
- Prohibit lenders from engaging in a pattern or practice of lending without considering a borrower's ability to repay a home loan from sources other than the home's value.
Mortgage lenders are worrying that the rules are too tough and will limit their customers' choices, while some consumer groups think the rules may not be strong enough.
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