As the Federal Reserve moves toward stricter lending rules, mortgage providers are firing back, calling the rules too broad and arguing that they could limit loans to borrowers who don't have credit problems, the New York Times reports. Regulation, bankers say, could raise the price of mortgages by increasing paperwork and the risk of lawsuits. The outcry has pushed the Fed to consider narrowing the number of mortgages the rules would apply to.
Broad rules could “encroach on traditional, common sense mortgages,” said a rep for independent banks. “Our fear is it will result in less credit availability, which is not what we need in an already tight credit market.” Others say the rules aren’t strict enough. “The Fed has accurately diagnosed that this is a brain tumor and responded by prescribing an aspirin,” said an analyst.