WASHINGTON — Hoping to avoid another subprime crisis, theFederal Reserve on Monday approved a series of rules to moreclosely regulate the terms and circumstances of housing loans.
|Lenders will be barred from making loans without proof of theborrower's income and must consider a borrower's ability to repaythe loan from sources besides the value of the home. In addition,lenders would have to ensure that borrowers set aside money fortaxes and insurance.
|Also, the rules restrict penalties lenders impose for paying offloans early and require advertisements about mortgages to containmore information about rates and monthly payments. .
|“Although the high rate of delinquency has a number of causes,it seems clear that unfair or deceptive acts and practices bylenders resulted in the extension of many loans, particularlyhigh-cost loans, that were inappropriate for or misled theborrower,” Federal Reserve Chairman Ben S. Bernanke said at themeeting.
|The rules do not apply to existing mortgages and take effect onOct. 1, 2009.
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