Fed to protect consumers from abusive mortgages

By , senior writerAugust 16, 2010: 12:43 PM ET

NEW YORK (CNNMoney.com) -- The Federal Reserve Board issued new rules Monday to protect consumers from abusive mortgage lending practices.

The new regulations, which take effect April 1, will ban lenders from paying mortgage originators more for putting borrowers in more expensive loans. Consumer advocates have long decried the incentive, known as "yield spread premium," saying it steers homebuyers into loans with higher interest rates.

Under the new rules, lenders will also have to disclose how borrowers' payments could change over time, including the maximum amount that could be owed under an adjustable rate loan. Homebuyers will also have to be told about any balloon payments due at the end of the loan's term.

The Federal Reserve has been tightening mortgage lending regulations in the wake of the housing bust. The Wall Street reform act recently passed by Congress includes similar provisions, but also addresses practices not covered by the board's new regulations. The Fed plans to implement the act's provisions in the future. 

#cnnfb_connect {background-color:#f5f5f5;width:auto;height:auto;padding:10px;clear:both;} Right Now

Reading on nation's economic health shows annual growth of 1.6% in second quarter, although slowdown is less than feared. With American concert-goers giving it the cold shoulder, Live Nation is turning to international fans -- with limited success The web can be a great tool for remodeling your home -- if you know the best way to use it. 

by

Since 1974, Ray's Candy Store has been satisfying New Yorker's taste buds 24 hours a day, 7 days a week. Chris and Chrissy Peplinski are determined to reach the highest credit rating possible: 850 points. Dick Costolo, COO of the micro-blogging site explains how Twitter hopes to one day turn tweets into profit. 

Markets	Last	Change	% Change
	10,150.65	164.84	1.65%
	2,153.63	34.94	1.65%
	1,064.59	17.37	1.66%
	2.65	0.15	6.12%
	1.28	0.00	0.36%

Data as of 3:59pm ET

Company	Price	Change	% Change
	3.76	0.10	2.73%
	12.64	0.17	1.36%
	18.37	0.19	1.05%
	11.56	0.39	3.49%
	20.81	0.11	0.53%

Data as of Aug 27Sponsored by Sponsors function showHideAdBox(){ var targetDiv = document.getElementById('moneySponsorBox'); var containerDiv = document.getElementById('adContainer'); if (typeof targetDiv != 'undefined'){ var elementArray = containerDiv.getElementsByTagName('div'); for (var i=0; i< elementArray.length; i++){ elementArray[i].style.marginBottom = 15; } if (targetDiv.offsetHeight < 40) targetDiv.style.display = 'none'; else{ targetDiv.style.visibility = 'visible'; targetDiv.style.marginBottom = 15; } } } var randomnumberA=Math.floor(Math.random()*2); // fortune content if (location.pathname.match('fortune')) document.write(''); else // moneymag homepage if (location.pathname.match('moneymag')) document.write(''); else // cnnmoney content if (randomnumberA==0) document.write(''); else if (randomnumberA==1) document.write('');
Sections

The proposed merger is expected to close Oct. 1 after the Department of Justice closes an antirust probe. Shareholders to vote Sept. 17.

Obama wants to raise taxes on rich and extend tax cuts for middle class. But some Dems oppose raising taxes -- even on rich -- in a faltering economy.

Paul Allen alleges 11 big companies are using technology he owns.

New York state is ramping up enforcement of its sliced bagel tax.

The financial industry may have recovered from the crisis, but its poor reputation has the the middle class looking for ways to manage their money elsewhere

Please create a screen name to access this feature.

Screen name (Select one with 3-12 characters; Numbers and letters only)

Forgot password

Enter your e-mail address below and we will send you an e-mail with a link and code to reset your password.

E-mail

Password selection

E-mail

Reset code

New password

Log in & let's get started!

E-mail

Password

Remember me for two weeks

Not a member yet?

Sign up or

Screen name

Select one with 3-12 characters;
Numbers and letters only

E-mail

Make sure you typed it correctly.
You will receive an e-mail to validate your account

Password

Make it 6-10 characters, no spaces

Type what you see in the grey box

If you can't read this,
Yes, I would like to receive occasional CNNMoney member updates about new features and special offers.

CNNMoney will use the information you submit in a manner consistent with our . By clicking on "sign up" you agree with and and consent to the collection, storage and use of this information in the U.S. subject to U.S. laws and regulations. ()

For our international users, please be aware that the information you submit when registering for our services is collected in the United States of America. In addition to being subject to our Privacy Policy, the collection, storage, and use of your data will be subject to U.S. laws and regulations, which may be different from the laws and regulations of your home country. By registering for this service, you are consenting to this collection, storage, and use.

We're Sorry!

This service is temporarily unavailable. Please try again soon.

Thanks!

Please check your e-mail and click the link to confirm your membership. Then, you'll be ready to participate in all activities and conversations on our site.

  Add comment

Name:
E-Mail:
Comment:
Enter code: