New Lending Rules
You're reading New Lending Rules, posted on Friday, May 25th, 2007 at 3:37 pm in Home Loans, News, on BrainBloggers at the Get The Loan You Need blog. More after the jump.
Federal Reserve Chairman Ben S. Bernanke said any new regulations to raise mortgage-lending standards should be careful to avoid limiting the availability of loans in “legitimate transactions.” The Fed will consider how it might use its rulemaking powers to curb abusive lending, Bernanke wrote in a May 18 letter to Senate Banking Committee Chairman Christopher Dodd. Dodd, a Connecticut Democrat who is running for president, released the letter today, calling on the Fed to require lenders to “fully evaluate” borrowers’ ability to repay the debt they take on.
The letter is the latest clash with Dodd, who is pressuring the Fed to use its authority under a 1994 mortgage consumer- protection law. Bernanke, who stated last week that more disclosure is the best way to persuade banks to tighten lending standards, said the Fed will study its rule-making ability.
Dodd has countered that the law is clear on the central bank’s powers. Dodd and other legislators have blamed the Fed for insufficient oversight during the housing boom that has ended in rising defaults and a rout in the subprime market.
Bernanke’s comments are a response to an April 23 letter that Dodd and nine other members of the Banking Committee sent to the Fed chairman saying the 1994 law “clearly mandates action by the Federal Reserve Board.” Bernanke noted that the Fed plans to hold a public hearing on June 14 to consider the issue.