New rules proposed for the mortgage industry should put an end to the abuses seen in the sub prime market. That's the prediction of Joe Theisen with the Wisconsin Mortgage Professionals Assocation , who says the new rules set to take effect in October of 2009 should help to protect consumers from high-priced loans they can't afford.
Theisen says lenders will face much more stringent requirements for people seeking "high cost" loans, which frequently have unfixed interest rates that can climb quickly. Those sub prime loans have taken much of the blame for collapses in the housing market.
The new rules from the Federal Reserve Board require lenders to verify an applicant's income and credit score, and prevents them from offering a loan to consumers with bad credit. Theisen says the rules will make consumers more aware of their responsibilities, and require them to save more and watch after their assets.
The reach of the new rules may be limited because the subprime market has pretty much dried up. Still, Theisen says it's important to have reforms in place now. He says they will protect consumers when the market recovers and more people start looking at buying homes again with sub prime loans.