The Federal Reserve is writing rules that will regulate prepayment penalties, escrow accounts, and stated-income loans, says Sandra Braunstein, the Fed’s director of consumer and community affairs.
Braunstein, who was part of a panel last month at the Urban Institute in Washington D.C., said: “Writing rules is a major undertaking and it’s something we don’t go into lightly because we are the Federal Reserve, we do believe in free markets. But we felt that the situation deserved some additional regulation at this point in time.”
Braunstein also said the Fed planned to overhaul the types of disclosures lenders are required to provide borrowers, and said the central bank appears likely to address deceptive advertising of these products.
Her remarks came after Fed Chairman Ben Bernanke told the House Financial Service Committee that the Fed would propose controls on specific mortgage lending practices later this year.