December 18, 2007

Fed Proposes New Rules For Lenders To Ease Mortgage Crisis

After months of urging from lawmakers, market-watchers and consumer advocates concerned about the impact of risky subprime loans on the slumping housing market, the Federal Reserve unanimously agreed to propose tighter restrictions on lenders this morning.

The proposal includes "a ban on low-documentation loans and limits on penalties for borrowers who prepay their debts," Bloomberg News reports. According to MarketWatch, the proposed rules would not apply to current borrowers but would instead aim to avoid future lending crises "like the one that has crippled the subprime mortgage industry."

"Our goal is to promote responsible mortgage lending, for the benefit of individual consumers and the economy," Federal Reserve Chairman Ben Bernanke said in a statement. "We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated."

CNNMoney.com and the Wall Street Journal (subscription) have more on the proposal, and the Fed's Web site has highlights. In related news today, the Economist named the subprime mortgage crisis the "biggest mess" in the business world this year.

Posted at 1:52 PM
Posted to: Ben Bernanke, Economy, Federal Reserve
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