Fed Seeks to Restrict Subprime Lending

Administrative Law

Posted Dec 18, 2007, 11:31 am CDT
By Martha Neil

After a national foreclosure crisis, the Federal Reserve has introduced proposed new regulations that, if adopted, would restrict subprime mortgage lending and essentially require lenders not to give borrowers mortgages that they clearly can't afford to repay.

The proposed regulations require more disclosure from lenders, define specific practices as misleading or deceptive and ban lenders from making so-called liar loans without requiring documentation of the borrower's income or assets, among other provisions, according to Bloomberg.

"The proposal would apply to all lenders—state and federally licensed—touching every corner of the mortgage market," writes the Wall Street Journal (reg. req.). "The Fed has never used this authority this broadly before, and it has been under constant criticism this year for not acting more aggressively as lending standards deteriorated in recent years."

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