Federal Reserve, State Regulators to Crack Down on Abusive Lending Practices
Tuesday July 17, 4:55 pm ET
By Alan Zibel, AP Business Writer
WASHINGTON (AP) -- Federal and state banking regulators on Tuesday said they would step up their scrutiny of lenders that make home loans to people with shaky credit, focusing on companies that operate outside federal banking oversight.
The pilot program announced by the Federal Reserve, two other federal agencies and state banking officials is scheduled to start in the fourth quarter and affect about 12 lenders. It will be designed to examine firms that account for the majority of subprime loans, a category that has experienced a surge of defaults in recent months.
Problems in subprime first emerged in February, when lenders HSBC Holdings PLC and New Century Financial Corp. reported mounting payment defaults.
Numerous subprime lenders have since gone bankrupt or have been sold. Foreclosures were up 87 percent last month from year-ago levels, real estate information company RealtyTrac said last week.
The announcement of the program comes one day before Fed Chairman Ben Bernanke is scheduled to give the central bank's midyear economic forecast to Congress. Lawmakers have blasted the Fed for lax regulation of the mortgage market before the problems came to light.
Last month, Rep. Barney Frank, chairman of the House Financial Services Committee, threatened to strip the Federal Reserve of its authority to write rules against mortgage abuses if the central bank did not act quickly. And Sen. Christopher Dodd, a Connecticut Democrat and presidential candidate who chairs the Senate Banking Committee, said in May that a "chronology of regulatory neglect" allowed the problems in the subprime market to go unchecked.
Only about a quarter of subprime loans in 2005, the most recent year available, were made by federally regulated banks, according to the Fed. The rest were made by state-licensed lenders and subsidiaries of federally regulated banks that operate with limited federal regulation.
The agencies said they would coordinate reviews of lenders and mortgage brokers to make sure they comply with consumer protection laws and evaluate the lenders' underwriting standards.
In a joint statement, the agencies said they would "initiate appropriate corrective or enforcement action as warranted by the findings of the reviews or investigations."
The home-mortgage business exploded in recent years, with big Wall Street investment firms buying packages of loans in bulk from banks and other lenders. A patchwork of federal and state regulatory agencies hold jurisdiction over banks and nonbank financial companies, putting many subprime lenders outside federal regulation.
Critics say the Federal Reserve has been slow to use its authority under a 1994 consumer protection law to crack down on deceptive mortgage practices.
Fed Governor Randall Kroszner said in a statement that "stronger collaboration by state and federal agencies in enforcing consumer regulations across a broad range of non-depository institutions will help us to better weed out abuses."
Also participating in the pilot project are the federal Office of Thrift Supervision, the Federal Trade Commission and state agencies, which are represented by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.
Regulators in 26 states have pledged to adopt lending standards similar to those adopted last month by federal banking regulators, which call on lenders to strictly evaluate borrowers' ability to repay home loans and include consumer protections.
![:]](https://goldseiten-forum.com/wcf/images/smilies/pleased.gif "Freude"){kind=small}
weil ein $ crash gedanklich bereits zwar von mir determiniert ist aber letzlich jeder crash enorme Energie kostet. Er bringt vielen viel Leid. Ich meine nicht die übertauchten Anfälle, sondern die Crashs die bis in die Wirtschaft durchschlagen und evtl. noch weiter. Da kann man m. A. nicht unbedingt froh sein, obwohl man eigentlich weiss dass umso eher desto besser.... anyway, es wird kommen wie es kommen muss.