WASHINGTON (Associated Press) – The Federal Reserve has adopted a new plan intended to curb shady lending practices that sent home foreclosure rates to record highs.
The plan will:
*prevent loans made without documentation of borrower’s income;
*require lenders to escrow money to pay taxes and insurance for risky borrowers;
*limit — and, in some cases, ban — prepayment penalties;
*prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value;
*require mortgage advertising to contain information about rates, monthly payments and other features of the loan;
*require that lenders credit a mortgage payment to a homeowner’s account on the day it is received; and
*forbid brokers and others from "coercing or encouraging" an appraiser to misrepresent the value of a home.
Most of the rules take effect Oct. 1. Escrow requirements will take effect April 1, 2010.
More information is available on the Federal Reserve Board’s website.
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