People have been wondering when, and if, the Federal Reserve would take stronger action to protect borrowers hit hard by the housing and credit crisis. The Associated Press expects new rules to be released Tuesday that would apply to all types of lenders, including banks and brokers. You may wonder what gives the Fed the right to issue these new regulations. While the Fed primarily focuses on the health of financial institutions, it also plays a lead role in two key consumer protections -- the Credit Protection Act (which includes Truth in Lending Disclosures) and the Consumer Leasing Act. In recent years it's been a wild, wild west out there as money flowed freely and a lot of loans were made that helped brokers make money more than they helped consumers find good financing options.

Rules expected to be proposed Tuesday include:

• Barring lenders from penalizing subprime borrowers who pay off loans early. Often there is a $12,000 or more penalty for early repayment on subprime loans. I know people who could qualify for prime loans with lower rates but who are stuck with subprime loans because of a particular loan program that sounded good initially but is now beyond what they can afford. Yes they made a mistake, but paying $12,000 in penalties seems steep to me if someone wants to refinance to get out of a loan their broker steered them to.

Continue reading Fed expected to propose new mortgage rules Tuesday

Fed expected to propose new mortgage rules Tuesday originally appeared on BloggingStocks on Mon, 17 Dec 2007 10:30:00 EST. Please see our terms for use of feeds.