The Federal Reserve Board is the only federal agency with authority to pass comprehensive and enforceable regulations that can stop the reprehensible abuses in the mortgage market. These are the abuses which are directly responsible for the current escalation of foreclosures across the nation and the unraveling of the broader housing market and economy. Yet, while the Summary of the Proposed Regulations thoroughly articulates the complex reasons for the current mortgage meltdown, nevertheless enactment of the Proposed Regulations will not prevent a recurrence. Despite the Board’s understanding of the difficulties faced by borrowers when dealing with the mortgage lenders and the unequivocal need for strong regulation, the Proposed Regulations continue to be most protective of the flawed concept that access to credit should be the guiding principle for credit regulation. These regulations need to be significantly strengthened in order for consumers to be adequately protected.
The stakes are high. At the end of 2007, about 40 percent of all foreclosures were homeowners with prime or subprime loans who couldn’t make their payments before any reset.9 Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default.10 20 percent of new foreclosures were prime adjustable-rate mortgages, which accounted for 15 percent of all home loans.
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