Posted on 04/19/2011 9:25:22 AM PDT by NormsRevenge
WASHINGTON (Reuters) - Lenders would be required to make sure prospective borrowers have the ability to repay their mortgages before giving them a loan, under a proposal released by the Federal Reserve on Tuesday.
The rule, which is required by the Dodd-Frank financial reform law, is intended to tighten lending standards and combat home lending abuses that contributed to the 2007-2009 financial crisis.
The rule would establish minimum underwriting standards for most mortgages and lenders could be sued by the borrower if they do not take the proper steps to check a borrowers ability to repay the loan.
The law does provide protections from this type of liability if a loan meets the specific standards that are part of a "qualified mortgage."
In its proposal, the Fed is seeking comment on two possible ways of defining a qualified mortgage.
Under the first scenario the loan could not include interest-only payments, a balloon payment and regular payments could not result in the principle of the loan increasing.
Under the alternative, the loan would have to meet all the standards laid out under the first option and meet additional requirements such as having the lender verify a borrower's employment status and debt obligations.
(Excerpt) Read more at finance.yahoo.com ...
I shoulda said....”Democrats AND Democrat-lite (RINO’s)
and if you were on the buying end of an instrument that carried an implicit government guarantee. Same result, no body cared.
Why no one is in jail over this entire mess is a scandal of epic proportions, even a larger one than the Zero himself. There should have been firing squads set up on Maiden Lane in NYC and those with the guns needed auto loaders.
And another way for the bureaucracy to get it’s barbs in deeper into business.
It’s also going to be a breeding ground for lawsuits, when financial institution gives someone a loan for a house, and that person goes belly up, they’ll blame the lender for loaning them the money in the first place. Just watch that materialize.
Yah - that should encourage banks to make loans! Banks bad, deadbeats good - got it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.