New lending rules were issued this week by the Federal Reserve, most of which will not be taking effect until October 1^st, 2009 and some as late as April 1^st, 2010.

Not only will banks have to abide the new rules but all lenders will be required to do so as well. Consumers should be grateful for the new lending standards being put into place and hoping to see a reduction in risky lending practices!

Brief Highlight of New Rules in Lending:

Coercing of appraisers to inflate the value of a home is now forbidden.

Mortgage payments must be credited to a borrower’s account immediately.

Loan applicants must document their income, and the income documentation must be submitted for loan approval.

Impound accounts are no longer an option but are required.

Caps on prepayment penalties, as well as limit them to more than 2 years.

Truthful advertising is a must with full disclosure of rates, payments, and details of the loan being advertised.

Lenders must take into account whether or not a borrower will be able to repay the loan by means other than of the home’s value.

The Feds plan of attack to regulate lending practices may have come a bit late, but as they say, better late than never! What say you? ….