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Tougher mortgage regs due?
Report: Fed banking regulators consider guidelines that may limit the number of risky mortgages.
May 19, 2005: 11:22 AM EDT
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NEW YORK (CNN/Money) - Federal banking regulators are weighing new guidelines for mortgage lenders due to growing concern about risks in the mortgage market, according to a published report.

The Wall Street Journal reports that the new guidelines could be completed as soon as early next year.

Recent years have seen a growth in several different types of mortgages that regulators are concerned pose greater risk for both borrowers and lenders. They include interest-only mortgages or loans for which borrowers provide little or no documentation of their financial resources or loans that are structured in a manner that can result in a rising rather than declining principal balance.

"There's a consensus among regulators that we need to be working on this," said Barbara Grunkemeyer, deputy comptroller for credit risk at the Office of the Comptroller of the Currency. The newspaper said the agency is taking the lead on the new guidelines.

Regulators are also likely to address the risks to borrowers and lenders posed by the increasing popularity of the more traditional adjustable-rate mortgages, (ARMs) according to the newspaper.

"Borrowers are going for the ARMs because they can qualify for a slightly bigger mortgage," Grunkemeyer said. "There are a lot of issues to be addressed there."

For more stories about the real estate market and what it means for your finances, click here.  Top of page


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