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Secretary Paulson proposes new guidelines for the mortgage and credit industry

 

The lending market could face new regulations if Secretary Paulson's plan is approved.

The mortgage and credit industry could undergo a major change if Secretary Treasure Paulson's reform gets approved. The industry has seen billions in credit losses over the past 12 months and has neared collapse on several occasions with the secondary market tightening up and lenders holding back funds into the open market. The logical steps will be requiring licensing on all levels to ensure the individuals and companies who are offering loans are qualified and adhere to clearer guidelines. Mortgage brokers have been made a scapegoat for pushing sub prime, option arms and adjustable rate mortgages to borrowers who never should have been offered the mortgages in the first place.  Another major focus of the proposed reforms will be looking into the accounting of the mortgage bonds on the secondary market. Derivatives and cdo's are a major focus of wallstreet and have basically been unregulated over the past few years. The housing collapse is projected to erode over 1 trillion dollars in wealth to the U.S. economy when it finally has reversed course. Much of the blame for the collapse has been tied into sub prime lending guidelines and lenders who were able to make easy money off of naive consumers. The days of qualifying for stated income loans with zero down payments are a thing of the past. Lenders have already tightened their underwriting guidelines for both refinance and purchase home loans. Most lenders are now requiring between five and ten percent down for purchase of a new home, even with borrowers have credit scores well over 700. Home owners who in the past could refinance and pull cash out of their home up to 100% of its value are now capped at 90% and lower in most U.S. markets on conventional financing. The credit markets will continue to evolve, but they will certainly carry more restrictions.

3-13-2008 ? LoanNetwork.com

 

 

 

 

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