Fed Outlines New Mortgage Rules

In new mortgage rules designed to take a hard line approach against predatory mortgage practices, Federal Reserve Chairman, Ben Bernanke said the focus would be on protecting the consumers.

"The proposed final rules we will discuss today (Monday) are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending while keeping credit available to qualified borrowers and supporting sustainable homeownership," Mr. Bernanke said in a prepared statement.

Among other new guidelines which will take effect from October 1, 2009 lenders cannot make high-risk loans without assuring that the borrowers has the ability to repay them, this will have to be done by verifying borrowers' income and assets.

The new guidelines also require mortgage advertising to contain more information about rates, monthly payments and other loan features.

The new rules follow swiftly on the heels of an announcement by the Fed and the U.S Treasury to bolster investor confidence in mortgage giants Fannie Mae and Freddie Mac.