US Federal Reserve are set to give bad credit mortgage holders more protection
The Fed is under pressure to ensure they help borrowers with poor credit sub prime loans. The downturn in the housing market has triggered a downturn in the US housing economy. People with bad credit mortgage loans will struggle when there rate is reset to the new present rates.
The Bush administration acted earlier this month to help bad credit mortgage borrowers amid fears the spiralling housing market could erode consumer confidence and push the US into recession. It announced a five-year freeze on interest payments for certain bad credit mortgages.
According to research from the Mortgage Bankers Association, the number of foreclosures on sub-prime adjustable loans hit record levels between July and September.
Hear are some of the new proposals which could come into force next year;
- Lenders could not agree loans without proof of income
- Borrowers must set aside money for taxes and insurance
- Lenders would have to make financial disclosures earlier
- Certain forms of advertising would be banned
- All loan rates must be displayed prominently, not just introductory or so-called “teaser rates”
