Back to the Future: Stricter Mortgage Rules
So the Fed is apparently almost finished writing up a new set of rules, to be enacted on Monday, that require mortgage lenders to actually qualify borrowers and document their income, according to this story in the L.A. Times. Imagine that!
The new (old) regs would have been most helpful several years ago, when the irresponsible-lending frenzy was at its peak. Now, money is so tight that even qualified borrowers with decent credit are having trouble obtaining mortgages. But better late than never: The stricter rules might come in handy when (if) home sales return to historic levels.
Meanwhile, in a speech Tuesday, Treasury Secretary Henry Paulsen noted (correctly)that homeowner-bailout bills being worked on by Congress are a waste of time.
“Many of today’s unusually high number of foreclosures are not preventable,” [Paulsen] said. “Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can’t possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions.”
Congress is still struggling to reach consensus on a foreclosure-mitigation bill, and President Bush has threatened to veto any such legislation.
But in California, Gov. Schwarzenegger on Tuesday signed a bill aimed at dealing with foreclosures in the state.
The bill, which took effect immediately, requires lenders to give homeowners an early warning that their mortgages are heading toward default. The measure also gives renters an extra 30 days’ notice to find a new place to live if their landlord is losing the property.
To address the problem of foreclosed properties falling into disrepair and creating community blight, the same bill also allows local governments to fine property owners (lenders) who neglect homes.
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