The Federal Reserve is caught in a tug-of-war as it prepares on Monday to unveil final rules overhauling mortgage lending.
Consumer groups are arguing that the regulations, as proposed in December, contain too many loopholes, allowing reckless lending to continue. Industry executives say the proposals place too great a burden on lenders and will prompt them to further restrict credit.
It appears the Fed was swayed by the more than 2,500 comments submitted on the proposals since it has signaled it has revised them, industry insiders say. But it remains to be seen which side the Fed favored.
"The question is which way will the Fed head?" said Kurt Eggert, law professor at the Chapman University School of Law and former Fed Consumer Advisory Council member. "That's what we're all waiting to see."
Though the proposals won't help the millions of homeowners who've already fallen behind in their mortgages, the Fed is aiming to prevent another such crisis by tightening lending standards, particularly for subprime mortgages.
