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Paul Kiesel
Paul Kiesel
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Bernanke and the Fed Approve New Mortgage Lending Rules, TILA Disclosures

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The Fed approved new mortgage lending rules on Monday in hopes of stemming “shady lending practices.” Most of the new rules will affect subprime borrowers who have been the largest group of victims throughout the mortgage mess.

The new rules, with the exception of one (creditors having to establish escrow accounts for property taxes and homeowner’s insurance — this rule will be phased in during 2010), will go into effect on October 1, 2009, and they will apply to all mortgage lenders.

Ben Bernanke said that, “The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership [. . .] Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers,” (CNNMoney.com, 7/14/08).

This is great to see. The Fed is finally cracking down on the problem(s) that got the U.S. economy into the current credit crisis, however, the new rules that Bernanke proposes will not help the millions of homeowners who’ve already fallen behind in their mortgages, and those same borrowers have been told by the White House and the Fed that help is on the way are still not getting the attention they need: The only help that the White House has offered troubled homeowners is Hope Now, but they should have named the program or assistance Hope Later… Maybe?

President Bush, who just a few weeks ago was vehemently opposed to the housing relief packages making their way through the Senate and House, is now leaning towards both bills in a favorable way. His attitude has changed in the last week as has Bernanke’s. He still has certain hang-ups with the language in the bill and who would receive certain aid/relief (he thinks homeowner relief would help specualtors, even though less than 8% involved in those type of loans are considered to be speculators), but if Bush could work with the Senate and House, both of which have been trying for months to put together a reasonable housing relief package, and not the other way around, we might see the troubled homeowners, who shouldn’t have been in the loans they’re in to begin with (if Bernanke or Alan Greenspan before him had done something to prevent the subprime boom), receive the help they need and “stimulus” to help pull the economy from going into a deeper housing slump.