Fed Adopts Tighter Mortgage Lending Rules To Prevent Market Abuses

Washington, D.C. (AHN) - The Federal Reserve have tightened rules related to mortgage lending, which the top financial officials claim will protect consumers from market abuses.

Chairman Ben Bernanke said on Monday that tighter mortgage regulations will also prevent the U.S. economy from collapsing again.

The final rules will be discussed on Monday and will be against the "unfair or deceptive acts and practices in mortgage lending."

Bernanke added that the loans, particularly high-cost loans, will be available to qualified borrowers and supporting sustainable homeownership.

Bernanke along with U.S. Treasury Secretary Henry Paulson have been asking Congress to overhaul the financial markets' regulatory structure.

The top officials asked to implement the new plan that would give federal regulators the authority to set standards for the capital, liquidity and risk management of investment banks.

Paulson said that the broadest overhaul of U.S. financial regulation can be a step towards restoring confidence in the markets after the subprime mortgage crisis battered the country's as well as the economies around the world.

The changes in the regulation of the financial markets will provide the Federal Reserve new regulatory powers on the Wall Street and to create new bodies to monitor mortgages and other transactions.

With the tighter rules, the consumers or borrowers will be benefited with the rise in competition in the mortgage lending market, Bernanke said.

According to a private company conducting surveys, RealtyTrac Inc., the number of U.S. foreclosure filings surged 53 percent in the month of June, compared to the year earlier.

The report released by the firm early this month said one in every 501 U.S. households entered the foreclosure process last month.

The proposed regulations would apply to "virtually all" subprime mortgages, but would exclude prime loans, according to the summary of the new provisions released before the meeting.