Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Fed to protect consumers from abusive mortgages

By Tami Luhby, senior writer


NEW YORK (CNNMoney.com) -- The Federal Reserve Board issued new rules Monday to protect consumers from abusive mortgage lending practices.

The new regulations, which take effect April 1, will ban lenders from paying mortgage originators more for putting borrowers in more expensive loans. Consumer advocates have long decried the incentive, known as "yield spread premium," saying it steers homebuyers into loans with higher interest rates.

Under the new rules, lenders will also have to disclose how borrowers' payments could change over time, including the maximum amount that could be owed under an adjustable rate loan. Homebuyers will also have to be told about any balloon payments due at the end of the loan's term.

The Federal Reserve has been tightening mortgage lending regulations in the wake of the housing bust. The Wall Street reform act recently passed by Congress includes similar provisions, but also addresses practices not covered by the board's new regulations. The Fed plans to implement the act's provisions in the future. To top of page

Index Last Change % Change
Dow 17,695.81 -134.95 -0.76%
Nasdaq 4,753.32 -51.97 -1.08%
S&P 500 2,055.27 -20.54 -0.99%
Treasuries 1.84 -0.00 -0.16%
Data as of 2:36pm ET
Company Price Change % Change
Bank of America Corp... 14.51 -0.28 -1.92%
Freeport-McMoRan Inc... 13.75 1.09 8.61%
Apple Inc 93.14 -1.69 -1.78%
Ford Motor Co 13.58 -0.51 -3.62%
Microsoft Corp 49.94 0.04 0.08%
Data as of 2:20pm ET
Sponsors

Sections

Oil refining giant Phillips 66 reported a big drop in earnings that disappointed Wall Street. The stock is one of the largest holdings of Berkshire Hathaway. More

The Dow is down 300 points over the past two days, leaving the index on track for its worst week since early February. Blame fumbled earnings reports from the likes of Apple and Google as well as concerns about the Bank of Japan. More

WeWork co-founder Miguel McKelvey talks to CNNMoney's Laurie Segall about his design process for WeWork buildings. More

Visa says new software will allow consumers to check out with chip cards as fast as swiping a card with magnetic strip. More