Government Urges Caution on Subprime Rates

The Fed, taking time out of its busy schedule of confounding numbers that affect our economy, issued a helpful tip to lenders in the subprime loan arena: be careful.

In case subprime lenders weren’t aware, they’re making loans to risky consumers.  In doing so, a significant number of these risky consumers proved to hold true to the “sub-“ part of “subprime” – defaulting at alarming rates.

According to an AP story, “The regulators said the guidelines, if formally adopted by the agencies and followed by lending institutions, could result in fewer borrowers qualifying for subprime loans. The mortgage industry had hoped for less stringent guidelines.”  And, just to make sure we’re all on the same page here, those guidelines?  “Be careful.”

Thanks, Federal Government!

John Robbins, chairman of the Mortgage Bankers Association, told the AP the group was concerned that the guidelines – “be careful” – "may restrict credit to many consumers in high-cost areas and deny credit to many deserving low-income, minority and first-time home buyers."

"I hope everyone in the market will quickly embrace these new guidelines, so we can move forward and work together to address the looming foreclosure problems that may lie ahead," Senate Banking Committee Chairman Christopher Dodd said.