Americans for Fairness in Lending

The first thing to say about the Federal Reserve’s proposed regulations is that they are long overdue.  The law authorizing the Fed to regulate “unfair and deceptive” mortgage lending practices was passed in the early 1990s, and the Fed has ignored repeated warnings about the subprime mortgage crisis as it was developing - warnings that are described in detail in the lead story in yesterday’s New York Times and emphasized in the Times’ lead editorial today, “A Crisis Long Foretold.”

Nevertheless, belated emergence from a state of denial is better than remaining there forever (as former Fed Chairman Alan Greenspan seems determined to do).  The Fed’s description of the systematic and widespread abuses in the market for subprime mortgage loans shows that they heard much of what consumer advocates and members of Congress told them in a series of hearings.  It is also notable that the proposed regulations would apply to all mortgage originators – including mortgage companies and mortgage brokers who are currently not subject to any meaningful federal regulation.  We also welcome the proposed banning of some of the egregiously misleading advertising practices by which predatory lenders have lured vulnerable borrowers into applying for abusive loans.

In spite of their positive features, the proposed regulations do not go far enough to eliminate predatory lending practices, as Debbie Goldstein of the Center for Responsible Lending pointed out earlier today on NPR.  During the ninety-day period for public comment, AFFIL and its Partner organizations will be urging the Fed to close loopholes and strengthen enforcement mechanisms.

Read more:  Center for Responsible Lending's response, The Consumer Law & Policy Blog