Mortgage Confidential: Fed's new sub prime rules will have little effect

Late last year, the Fed approved some new mortgage guidelines as part of a broad effort to fix the housing woes. These guidelines, aimed at the sub prime mortgage industry:

  • Requires lenders to determine the borrower's ability to repay a mortgage loan by using the highest potential mortgage payment during the first seven years of the loan.

  • Ban "no verification" loans -- meaning lenders must now verify both income as well as assets.

  • Ban prepayment penalties if the payment could change any time during the first four years of the new loan.

  • Require insurance and tax escrow accounts, called "impound" accounts in many parts of the country.

There. That will fix those mean old sub prime lenders. No more sub prime lenders making bad loans to people who can't afford them. Yeah, that'll teach 'em. The problem is, just exactly who will these new rules apply to, hmmm? I don't see any sub prime lenders, they're all out of business. Went away last year. Can anyone say, "too little, too late?"