Consumer Law

Fed to Announce Mortgage Rule Monday

By Alan White

The Federal Reserve will announce its final unfair mortgage practices rule at an unusual public meeting on July 14. The proposed rule would regulate subprime mortgages by requiring reasonable income verification and prohibiting a pattern and practice of making loans without regard to repayment ability, mandating escrows for tax and insurance payments, and placing very modest restrictions on prepayment penalties.

There has been growing concern among consumer advocates that the Fed will yield to pressure from the industry to water down the rule, particularly by weakening the repayment ability requirements and by carving out parts of the subprime market from the rule's coverage.

For the Fed to consider substantive regulation of unfair and deceptive practices represents a dramatic change in the culture of deregulation and cheerleading for the "democratization of credit", albeit a change prompted by a credit crisis of historical proportions. It remains to be seen whether the Fed will have the courage of its (new) convictions.

[oops - missed seeing Jeff's earlier post on this]

Full post as published by CL&P Blog on July 10, 2008 (boomark / email).