Fed Cracks Down On Deceptive Lending
Central Bank Approves Plan That Strives To Thwart Practices That Fueled Credit Crisis
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Photo
Federal Reserve Chairman Ben Bernanke speaks at the FDIC Forum on Mortgage Lending for Low and Moderate Income Households, July 8, 2008, in Arlington, Va. (AP PHOTO)
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Credit Crunch
Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
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Chairman Ben Bernanke and his central bank colleagues approved a plan Monday that would crack down on dubious lending practices that have hurt many of the riskiest "subprime" borrowers - people with tarnished credit histories or low incomes.
In that regard, the plan would:
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"Rates of mortgage delinquencies and foreclosures have been increasing rapidly lately, imposing large costs on borrowers, their communities and the national economy," Bernanke said.
"Although the high rate of delinquency has a number of causes, 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 the borrower," he added.
For all mortgages, the plan would require advertising to contain additional information about rates, monthly payments and other loan features, and it would curtail certain deceptive or misleading advertising practices.
Other practices also would be clamped down on. Lenders, for instance, have to credit a mortgage payment to the homeowner's account on the day it is received. And, brokers and others are forbidden from "coercing or encouraging" an appraiser to misrepresent the value of a home.
Consumer groups initially complained that the new rules are not strong enough. Lenders worry they are too tough, could limit mortgage options for people and made it harder for some to obtain financing.
The new lending rules may not get a test for some time because there are fewer home buyers these days, given all the problems in the housing and credit markets. Also, some of the shady practices - along with some lenders - have not survived, felled by the mortgage meltdown.
"Clearly this is closing the barn door after the fact," said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School of Business. Yet, she said, "this is a very important move. It absolutely will make a difference going forward."
Much will hinge on effective enforcement.
The plan would apply to new loans made by thousands of lenders, including banks and brokers. It would not cover current loans.
Those different lenders fall under a patchwork of regulators at the federal and state levels. So it will be up to each of these authorities to enforce the new provisions.
Fed Governor Randall Kroszner, the central bank's point person on the new rules, said the Fed's goal was to protect borrowers from unfair or deceptive practices while also not impeding the flow of credit.
The Fed's rules, he said, should "better protect consumers, while preserving their access to credit as they make some of the most important financial decisions of their lives."
© MMVIII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.



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Please? I agree with drputt45.
I even use to return the uncompleted apps stapled together in their own return envelopes. That didn''t help. I even tried to put uncompleted apps into the return envelope for a different bank, that didn''t help. I finally moved and didn''t leave a forwarding address. That was my only soultion.
This is a good start but it''s a little weak.
Open flood gates, close flood gates.
Sun goes up, sun goes down. Sun goes up, sun goes down. Their the ones who removed the regulations in the first place, so the whole lending scam could move forward. Hey America, keep your head in the sand, your *** in the air, and your wallet open.
When they biased the bankruptcy laws against the consumer and in favor of the financial industry, this Administration and the Republicans greatly reduced the PERCERPTION of the risks that the financial industry felt they were exposed to when they loaned money.
And like any cannibilistic capitalist, the financial industry abused their new power until they began to eat themselves.
The Republicans should have looked within themselves when they were pondering whether Business operating in a loosely regulated environment could be trusted to "do the right thing".
Posted by shado269
Oh, you under estimate them. If you want to steal billions in cash, you can try to rob a bank (you won''t see the $$$ and most likely will get a good stretch in jail), or you can become a politician (where even if you get caught stealing the billions, you won''t do a day after your pardon).
1) Buyers were stupid to think the interest rates wouldn''t rise. I remember when a 12% mortgage was average.
2) Banks were seriously pushing ARMs. My bank tried to push a 4.3% ARM on me saying "Look at the rates, Do you really think they will be going up any time soon?" (then 2 years later - Wham! they went up)
The buyers were looking for more than they knew they were able to get...
The banks were looking for more interest than they knew they would normally get...
Simple thing? Greed! on BOTH sides. and now I have to suffer through some seriously tough times because of their greed.
these rules restrict the access to credit to applicants ... all the way around.
not everyone who did not verify income and did not ''put money to the side for insurance'' are defaulting.
Now let''s drill our way out. RIGHT!
can you carry on an intelligent conversation without calling people names. i know all about ARMs. my parents had one in the seventies. their rate went from
5% to 17%. they had to struggle and work extra jobs but they overcame because they cut back and didn''t drive new cars, wear new clothes, eat out and all the other things our generation thinks we can''t do without. That''s not fascist! That''s hard working!!!
Predatory lenders and their agents should be held accountable, but don''t through out the baby with the bath water. Stated income loans, just like adjustable rate loans are not evil. For the right person, at the right time, at the right risk level, based on loan to value and credit, ARM''s can be beneficial.
These new rules will wipe out more equity through reduction of home values than all the bad loans ever made. WRITE YOUR REPRESENTATIVE!
can you carry on an intelligent conversation without calling people names. i know all about ARMs. my parents had one in the seventies. their rate went from
5% to 17%. they had to struggle and work extra jobs but they overcame because they cut back and didn''''t drive new cars, wear new clothes, eat out and all the other things our generation thinks we can''''t do without. That''''s not fascist! That''''s hard working!!!
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Posted by blessed1959 at 04:18 PM : Jul 14, 2008
Huh? MCVet hasn''t posted on this site.
"It''''s just the "poor me" mentality like the Katrina "victims", entitlement seeking scumbags sucking on the taxpayers'''' teats."
You have such a way with words.:)
Thank you. Do you have any suggestions for improvement? At my age, it is difficult to recall some of the vocabulary from the past.
I don''t suppose you have any of these thieves in Canada. The USA is filled with opportunistic individuals who scream they were cheated when things go awry. Most of the borrowers in this area were scheming, lying, deceitful people taking out loans they shouldn''t have qualified for. The bailout is a major error in my opinion.
Have a nice day.
Like blaming the soldiers for dying for oil, you must at some point realize the extreme propaganda that falls on us everyday from the war profiteers and marketers.
"I don''''t suppose you have any of these thieves in Canada."
None that I have heard of. We have these small "money mart" things where people can go and get a small amount of money until their cheques come in. But they aren''t too bad, because the government keeps a close eye on them.
"Most of the borrowers in this area were scheming, lying, deceitful people taking out loans they shouldn''''t have qualified for."
Either that or they were extremely DESPERATE.
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Posted by kissamaarse
Good question! Just follow the money! No republican or democrats, only politicians that would pimp their mother for a dollar, euro or yen!!
I believe that the bank that the FDIC took over - IndyMac - had something over 10,000 depositors who had more than $100,000 on deposit.
I''m willing to wager that most - if not all - of those depositors voted Republican regularly and cheered tax cut after tax cut no matter the economic damage they would cause, and equally regularly cursed the Democratic Party for being - in those infamous words - the "tax and spend" Party.
Now, those same depositors stand to get 50 cents or less back for every dollar over $100,000 they had on deposit in IndyMac.
So what has really happened is that instead of their money going to taxes that help to educate people who may work for them, or to the highways that get them or their employees to work or their customers to their stores or their product to market, 50% of everything over $100,000 they had on deposit effectively went to unscrupulous loan officers in the form of incentive bonuses, or to bank executives who looked the other way at bad loans, or to Wall Street traders who played tricks buying and selling rotten credit derivatives.
In other words, instead of hundreds or thousands or even millions of Americans receiving some benefit from their taxes - which in turn would have benefited those same depositors, a dozen or two of their fellow Republicans stuck it to them and they will NEVER receive any benefit from their losses.
lollll...ironic, and funny...
VOTE OUT ALL POLITICIANS WHO WERE BORN 1946-1957.
THE COW IS GONE!
THE CHICKENS ARE GONE!
THE BARN IS BURNING!
QUICK QUICK LOCK THE BARN DOOR!
Posted by dan3232321 at 12:13 AM : Jul 15, 2008
Now the RECORD speaks TRUTH and the RECORD shows CLEARLY that Democrats were FIRMLY against the removal of all the Regulations and changing the Bankruptcy Laws. If you aren''t going to be accurate how can we expect to turn this whole thing around. The Republican Party, owned by Big Business, were the very people, in fact it was the Co Chair of the McCain Champaign, that took all the regulations off the Banks. When we got the loan on our house the Lender was REQUIRED to obtain our W-2''s to assure the Board that we were, in fact, able to make the payments. Why? Because the Bankruptcy Laws and Federal Regulations would cause them great difficulty if they didn''t. Let''s at least put the blame where it belongs.
Posted by caldwellptr at 06:18 PM : Jul 14, 2008
No, I''d say you need to be the Co-Chair of John McCain''s Champaign... He''s the guy who ALLOWED the lending people to WRITE our laws... That''s right folks the guy who run''s the economic''s for John McCain is RESPONSIBLE for the Enron Loophole. Now what''s the chance that Dr. Phil will have the perscription for what ails us?? LOL
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by xmanborg
July 15, 2008 10:02 AM PDT
- Thank the LORD that George W Bush has finally come with is Government to SAVE US.
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