BODY: The Federal Reserve Board has expanded the
scope of a 1994 law aimed at preventing the growth of what is known as predatory
mortgage lending without making all the changes consumer groups sought.
The Fed has revised the Home Equity Ownership and Equity
Protection Act to extend the 1994 law's consumer protections to more high-cost
mortgages.
Currently, 12.4 percent of "subprime" first
mortgages, those made to borrowers with tarnished credit, are subject to the
law. When the changes take effect on Oct. 1, 2002, 38 percent of such loans will
be covered.
"The rules are a measured response that
balances various concerns so as not to impede the growth of the legitimate
subprime mortgage market," said Edward Gramlich, a Federal Reserve governor.
Predatory lending involves loans with excessive or hidden
fees or a mortgage refinancing that does not help the consumer.
The subprime loans market has grown to $140 billion in loans in 2000
from $65 billion in 1995, according to Inside Mortgage Finance, an industry
publication. The rise of the subprime loan market has led to a growth in
predatory lending.
The Fed "didn't come through on
everything we wanted, but on whole, the proposal represents a step forward,"
said Allen Fishbein, executive director of the Center for Community Change, a
housing advocacy group in Washington.
The Fed lowered a
threshold that requires certain consumer warnings and disclosures for high-cost
mortgage refinancings, or those with interest rates and fees 10 percentage
points above comparable Treasury securities. The Fed lowered that trigger point
to 8 percent above Treasury securities.
Document 332 of 584. 