The Federal Reserve yesterday approved new rules to govern the home loan market and enforce responsible lending practices.
As part of the new rules, which come into effect in October next year, lenders will not be able to make any higher-priced (sub-prime) loans without regard to borrowers’ ability to repay the loan from income and assets other than the property.
Prepayment penalties have also been curbed.
Federal Reserve chairman Ben Bernanke said “besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers”.
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