The Federal Reserve unanimously approved new mortgage lending rules Monday in a crackdown on shady practices - particularly those involving subprime loans made to borrowers with weak credit.
The agency made several substantial revisions to the proposed regulations it unveiled in December. Many of the changes acknowledged consumer advocates' concerns that the rules still contained too many loopholes that would allow shady lending practices to continue.
But the Fed also made some concessions to industry executives, who feared increasing oversight would lead to less lending.
The new rules will apply to all mortgage lenders, not just those supervised and examined by the Fed. All but one requirement will take effect Oct. 1, 2009. However, board members said they will continue to work on further oversight of the mortgage industry.
"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," said Fed Chairman Ben Bernanke. "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."
The proposals won't help the millions of homeowners who've already fallen behind in their mortgages, but the Fed is aiming to prevent another such crisis by tightening lending standards, particularly for subprime mortgages.
Many critics have charged that under former Fed Chairman Alan Greenspan, there were few restraints during the real estate boom. They say the agency should have flexed its muscles several years ago, clamping down on unscrupulous lenders and protecting borrowers.
