Industry News

Bernanke promises new rules to combat unfair lending practices

Policy shift a departure from reliance on guidance, disclosures

The Federal Reserve will propose new rules to combat unfair or deceptive mortgage lending practices later this year, Chairman Ben Bernanke told members of the House Financial Services Committee Wednesday. Bernanke's announcement that the Fed will exercise its rule-making authority under the Home Ownership and Equity Protection Act (HOEPA) marks a departure from an emphasis on tighter guidelines for lenders and improved disclosures for borrowers. In his prepared remarks to lawmakers, Bernanke noted federal regulators have already improved disclosures for adjustable-rate mortgages, requiring better explanations of risks like payment shock and negative amortization. And by the end of the year, he said, the Federal Reserve will propose changes to Truth in Lending Act rules governing incomplete or misleading claims in mortgage loan advertisements. "We are certainly aware, however, that disclosure alone may not be sufficient to protect consumers," Bernanke said. "Accordingly, w...