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Fed aims to protect Americans from shady loan practices

READ MORE: Fed aims to protect Americans from shady loan practices

Recent lending practices, particularly for some mortgages, have been called everything from dishonest to outright dangerous.

Tuesday the Federal Reserve took action to protect Americans from questionable loan practices that have left some homeowners barely holding on.

The sub-prime mortgage crisis has cost millions of Americans their homes, and put millions more at risk.

To ensure this never happens again, the Federal Reserve is offering new protections against shady lending practices.

Federal Reserve Chairman Ben Bernanke said, "Unfair and deceptive acts and practices hurt not just borrowers and their families, but entire communities and, indeed, the economy as a whole."

Some of the proposals include:

  • Restricting lenders from penalizing sub-prime borrowers who pay off their loans early
  • Forcing lenders to make sure sub-prime borrowers set aside funds to pay for taxes and insurance
  • Cracking down on misleading ads by lenders
  • And requiring lenders to have proof of a borrower's income.

Federal Reserve Governor Randall S. Krozner said, "The carefully considered rules that we are proposing today will go far toward ensuring reasonable credit options for consumers while stemming the problems we have seen."

Still, some lawmakers criticize the fed for not acting fast enough, and not enforcing existing laws, which already give the agency broad power to stamp out dangerous loans.

Meeting in Washington Tuesday, the Fed reminded Americans they need to accept A certain amount of responsibility themselves.

Krozner said, "Consumers also need to be well-informed shoppers when it comes to the important decisions of buying a home and taking out a mortgage."

Before any of the rule changes go into effect, they must be voted on again after a 90-day period of public comment.

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Show us the ratio!

How many people are actually losing their primary home, and how many are "flippers" who were caught with their pants down when the housing market collapsed? ARMs have a purpose. They're specifically designed for the young professional, just starting out in life, who has a good chance at seeing his or her income substantially higher in the coming years. Too many "real estate moguls" (Ha!) started to view ARMs as cheap financing for the homes they bought, upgraded, and resold quickly. Every flipper wanted a cheap ARM, because the property would be sold and the loan paid off long before the rates went up. Unfortunately when the market collapsed the homes DIDN'T sell quickly, and now they're howling! But nowhere, nowhere can you find the exact ratio of how many families are truly losing their primary residence....and how many are simply investors seeing their dreams of quick wealth going up in smoke. My brother works in investment banking up in the Northeast, and he tells me that it's believed to be upwards of sixty percent! The media won't even look at the issue, because it would soon become a NON-issue if the facts came out. No one wants to see a family lose their home.....but no one feels a bit of sorrow for a guy who is simply taking a dent in his wallet because an investment didn't pan out. Bottom line: If you aren't going to see a marked increase in your income over the coming years and sign an ARM anyway, you're a total knucklehead. You're playing economic Russian roulette.

Hee Haw

Show me a lender with ethics and I'll show you a donkey with feathers...... Why don't you disclose everything to the borrower like the kickback % from your ever so often bank that you don't have to disclose to your client. Let them know you're getting a $5000 paycheck for closing their homes at a subprime instead of working to secure a lower flat rate. Wait ....yoy wouldn't want to loose those incintives you legally do not have to disclose to the borrower now would you..... SO of course you will stay with shady business to make a bigger paycheck.... Who wouldn't ? In short.. If you throw candy in front of a kids face, and they like candy.. They are going to eat it... If you let a child decide on on pirce that all cost the same.. They will be a decision on what they thnk is bast.. SO as long as the government allows us to dangle the candy... The only incintive is to make the most money one can.. And it is not illegal! But unethical.. ?? Of course....

STUPID

STUPID STUPID...this is an area where the government should MIND THEIR OWN BUSINESS! These borrowers were borrowers that KNEW that they had ONE chance to fix their bad credit, then refinance to a fixed rate loan. Instead they took advantage of the situation and now are crying about it. ANYONE who gets an ARM is asking for it. You get those KNOWING FULL WELL you can get screwed in a situation where interest rates are going up. STUPID IS AS STUPID DOES!

I completely agree with both

I completely agree with both of you. But businesses do have some shady practices when it comes to ads and how they sell their product. They try to make things seem different than what they really are. I like the fact that the government is going to penalize businesses that obviously try to dceeive the consumers

stupid who??

This comment sounds like the words of our lender! Besides the grammer mistakes in your posting.....I also find your comment stupid and absurd. Many lenders have preyed on the emotions of anxious soon-to-be homeowners by coaching them into loan products that would "get the deal closed" instead of coaching them on the consequences. If we continue to pay loan officers and realtors on a commission base (only paid if the deal closes)...we'll continue to have people buying things they shouldn't. Is someone really going to tell you the truth if it means they may not get paid?????

Grammer? It's "grammar".

Grammer? It's "grammar". This is what happens when you blast others. You end up making mistakes yourself.

Emotions?

If you make major financial decisions based upon your emotions, rest assured that no amount of federal legislation or regulation can help you. The basic rules of ARMs haven't changed in years. If you signed up for a loan you cannot afford to pay back, perhaps your "emotions" let you down. Your brain certainly did.

Loan practices

You cannot enact a law that will protect stupid people from doing stupid things!

But you can inact laws to

But you can inact laws to prevent devious lender from taking advantage of them.

Sure you can

The government has enacted many laws to protect the stupid and to help them continue to breed. Also think of the many lawsuits in the past brought by stupid people because of their own stupid actions.... I didn't know coffee was hot and I spilled it on my lap. Look at a hair dryer and look at some of those silly warnings and then think, 'They are there because somebody tried that in the past.'