New Fed Rules To Crack Down on Shady Lending

Washington, DC, July 9, 2008--In its most significant response to the current housing crisis, the Federal Reserve will issue new rules next week aimed at protecting future homebuyers from dubious lending practices.

Fed Chairman Ben Bernanke said the Fed will adopt rules to stop a range of shady lending practices that have hurt many of the nation's riskiest "subprime" borrowers.

The plan, which will be voted on at a Fed board meeting on Monday, would apply to new loans made by thousands of lenders of all types, including banks and brokers.

The new rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower's income. They would also require lenders to consider a borrower's ability to repay a home loan from sources other than the home's value.