Federal Reserve Endorses New Protection Plan for Homeowners

Today the Federal Reserve announced that they would endorse new rules that will give people taking out home mortgages protection against shady lending practices.

These new rules are ment to protect borrowers from getting into the riskier types of mortgages that are like the ones hurting the housing and credit market today. The plan looks like it will be finalized early next year going into effect across the US.

The first major change would be one which restricts lenders from charging certain types of prepayment penalties. Second that lenders must require that subprime borrowers escrow their taxes and insurance payments so they are not shocked with a large bill when they come due. Third that we bar lenders from loaning money to borrowers that are unable to verify their income. Last of the major changes would restrict lenders from lending without strongly considering a borrower’s ability to repay a home loan from sources other than the home’s value.

This mortgage plan comes at a time when we are experiencing record foreclosures across the US. Of approximately three million subprime adjustable rate mortgages surveyed by the Mortgage Bankers Association from July through September, 4.72 percent went into foreclosure during those months.

To read more about the Fed to unveil home mortgage plan head on over to CNBC.