Fed Plans Hearings on Predatory HE Lending

The Federal Reserve Board intends to hold public hearings this summer on home equity lending that will address predatory lending practices and mortgage disclosure issues.Fed Governor Susan Schmidt Bies said the hearings will review the effectiveness of the Home Ownership and Equity Protection Act regulations in addressing abusive lending practices as well as the availability of subprime credit. "These hearings are a first step to a broader review of mortgage disclosure rules," Ms. Bies said. She noted that the recent guidance on interest-only and payment-option adjustable-rate mortgages suggests that lenders should alert consumers about the potential for negative amortization and payment shock. The hearings will explore the adequacy of existing disclosures on IO and option ARMs, as well as 40-year mortgages and reverse mortgages, she said.