At today's meeting on mortgage rules, Federal Reserve Chairman, Ben Bernanke, said "it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high cost loans that were inappropriate for or misled borrowers".
In an effort to stop lenders from making loans to people who really can not afford them, the following rules have been adopted:
Lenders must prove a borrower's income;
High-risk borrowers must set up a savings fund (impound account) for taxes and insurance;
Lenders are restricted from penalizing risky borrowers who pay loans off early; and
Lenders are required to considering a borrower's ability to repay the loan from sources other than the home's value.
Predictably, consumer advocates believe that the new rules do not go far enough to protect borrowers, while the lending industry insist these restrictions will limit the loans they generate, thereby further deepening the housing crisis.
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