One Iceberg--Two Tips
December 18, 2007
Fed Approves Plan to Curb Risky Lending
WASHINGTON — The Federal Reserve moved Tuesday to impose new restrictions intended to curb unfair and deceptive home-lending practices and prevent a recurrence of this year’s meltdown in subprime mortgages.
By a 5-to-0 vote, the Fed approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans — whether from banks, mortgage companies or other lenders — than under current regulations.
The proposed rules underscore the more assertive role the Fed is now prepared to take in regulating lending, in a big shift from the central bank’s approach in the past.
In general, the rules are meant to deter unscrupulous lenders from persuading people that they can afford loans that ought to be out of their reach. By extension, the rules are also intended to keep would-be buyers from deceiving themselves about the debt burdens they can shoulder.