JustQuotes: Closing Up The Subprime Barn Doors (After The Fact)
“Federal Reserve staff recommended that policy makers issue new restrictions on subprime mortgages, from a ban on low-documentation loans to limiting penalties for borrowers who prepay their debts.
The rule proposal, which the Board of Governors will vote on later today, follows months of public comment by Congress and consumer advocates, who urged the Fed to toughen consumer protections. Finance-industry officials warned that a crackdown would curtail lending in the midst of the housing recession.”
“The Fed proposed tightening restrictions on so-called pre- payment penalties, requiring the escrow of taxes and insurance, and banning loans made without verification of income or assets. Lenders would be responsible for determining whether their customers can afford a loan after the initial interest rate resets.”
∙ Fed Staff Recommends Tighter Curbs on Subprime Loans [Bloomberg]