Until now, states have taken the lead role with rules on lending.
On Oct. 1, the Federal Reserve’s new federal rules come into effect.
Those with poor credit currently pay up to two interest points more.
The new rules force lenders to have adequate documentation of income. Liar loans have basically fallen off the map anyway since the subprime crisis.
Mr. King said another shortcoming in the new regulations is that they do not cover option ARMs, adjustable-rate mortgages on which borrowers can choose from several monthly payments options during the loan’s early years. (Borrowers often chose the minimum-payment option, which usually didn’t even cover the loan’s monthly interest charge.)
JIM PAIR, the president of the National Association of Mortgage Brokers, which is based in McLean, Va., says he is pleased that the new rules do not enact a “suitability standard,” whereby loan officers are legally responsible for offering loans that best suit the borrower’s circumstances.
But Mr. Pair said he was concerned that the rules would greatly curtail loan alternatives, especially for those who might qualify only for subprime mortgages.
“We’re going to have some consumers who are not able to purchase a home because of this, since most lenders don’t want to do high-cost loans,” he said. “There’s too much potential liability for them.”