After two years of watching and waiting, the Federal Reserve has finally stepped in and made new guidelines that lenders must abide by when writing loans to not only those with shaky credit, but to those with ironclad credit as well. Risky lending became very popular in 2005 and the first foreclosure that was a result of sub prime lending was just the beginning domino in a long curvy line of dominoes that have now all toppled and affected not only the housing market, but the investment market and other financial markets too.
Two billion dollars were doled out in sub prime loans which gave many Americans a taste of the American dream of homeownership. Now many Americans have faced foreclosure, and those that haven’t met those demons of losing their home are doing almost everything in their power to not have to encounter them.
Under the new guidelines set by the Federal Reserve, borrowers must prove their income before a loan can be written. The lender must take this seriously, because if they write a loan to a person that is unable to make the payments, they can be barred completely from writing loans altogether. Also, lenders can’t advertise teaser rates or get a person into a loan without informing the borrower about how much they will be paying, even if interest rates should rise.
The Federal Reserve stepping in may seem a little late to some people, since so many people have been hurt by sub prime loans, but many people are just happy that they have finally stepped in. With the new guidelines in place it will make the beginning of 2008 a time for America as a whole to start recovering from the sub prime loan bust.
Other articles of interest:
- Are Subprime Loans Bad?
- Is There an Ease in Foreclosure Rates in the Future?
- Housing Slump…It’s a Good Time to Start Home and Loan Shopping
- What are Sub Prime Borrowers Doing to Protect Themselves?
Posted by Alan 
February 2008