You gotta love it! The "it" just might be the supreme case of slamming and latching the barn door long after the horse has galloped off into yonder hills.
I'm referring to Tuesday's request by the Federal Reserve Board for public comments on a new set of proposals for Regulation Z (Truth in Lending) relating to deceptive or unfair practices in the mortgage lending process. A number of the proposals just might send Fools -- who tend to be brighter than your average bear -- into paroxysms of laughter.
For instance, under the proposal, "Creditors would be prohibited from engaging in a pattern or practice of extending credit without considering borrowers' ability to repay the loan." Imagine that! No more tossing mortgages to anyone who can create a film on that small mirror glued to the bottom of the application.
And, "Creditors would be required to verify the income and assets they rely upon in making the loan." This one runs the risk of further reducing the number of mortgage lenders by inserting an element of real work before "approved" can be stamped on a loan application.
And "Prepayment penalties would only be permitted if certain conditions are met, including the condition that no penalty will apply for at least 60 days before any possible payment increase." There goes the chance for the lender to intone a hearty "gotcha" just before zooming a borrower's payments into the stratosphere.
It appears that these and other rules, absurdly obvious as they are, would apply to the full range of mortgage lenders, from Countrywide
But apparently, not everyone was amused by the Fed's proposals. As The Wall Street Journal noted on Wednesday, "Congressional Democrats pounced on the central bank for having failed to act before the current wave of home foreclosure and for not seeking bigger changes in mortgage-industry practices." Beyond that, the paper reports that the House Financial Services Committee could attempt to force the Fed to give up some of its regulatory jurisdiction.
That's all we need. If some of my Foolish friends were put off by the administration's efforts -- without the use of public funds -- to come to the aid of a portion of those threatened by interest rate resets, they'll love it when Congress begins thrashing around in the issue. Should that occur, you can look for mortgage lending and housing to recover about the time your grandchildren are being handed their retirement watches.
For related Foolishness:
- Desperate Realtors Applaud Bailout
- Do Homeowners Deserve a Bailout?
- Your First Million Is the Toughest
Fool contributor David Lee Smith owns neither a horse nor shares in any of the companies mentioned. He does welcome your questions or comments. Bank of America is an Income Investor recommendation. The Fool has a disclosure policy.