With the subprime crisis in full bloom, the Federal Reserve is making moves to end shady mortgage lending practices once and for all. The proposal on the table will apply to all new and future loans made by lenders and should be finalized sometime next year. Among the proposals being considered:

  • Lenders must have proof, or verification, of a borrower’s income.
  • Lenders must consider the borrower’s ability to repay the loan.
  • Lenders must make sure subprime borrowers have money to pay taxes and insurance.
  • Lenders are prohibited from engaging in deceptive and misleading advertising. “Teaser” rates must be given full disclosure.
  • Mortgage brokers barred from “coercing or encouraging” appraisers to artifically appraise the value of homes.
  • Barring lenders from penalizing subprime borrowers who pay off their loans early.



None of these proposals seem way out of line to me. Who wouldn’t want a borrower to be able to pay off a loan? Methinks the days of free money are coming to a close. If you are looking to buy a home, be sure to read our article on finding a mortgage that works.

Credit: Yahoo! news article