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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 18,232.02 -53.72 -0.29%
Nasdaq 5,089.36 -1.43 -0.03%
S&P 500 2,126.06 -4.76 -0.22%
Treasuries 2.22 0.03 1.37%
Data as of 12:44pm ET
Company Price Change % Change
Bank of America Corp... 16.75 0.06 0.36%
Apple Inc 132.54 1.15 0.88%
Hewlett-Packard Co 34.76 0.93 2.75%
AT&T Inc 34.71 -0.36 -1.03%
Microsoft Corp 46.90 -0.52 -1.10%
Data as of May 22
Sponsors

Sections

The record airbag recall and the GM ignition switch recalls has resulted in a huge percentage of cars on the road today having been recalled. More

The True Cost, a new documentary, chronicles the evils of the clothing industry and asks us to stop buying so much cheap stuff More

Sarah Kauss launched S'well to rid the world of plastic water bottles. In five years, she's sold 4 million of her stainless steel bottles. More