The Federal Reserve Bank is looking into ways to help with the subprime housing crisis, which is causing a lot of pain for consumers, especially in the mid-western states, where a lot of people are losing their jobs, mostly because of layoffs in the auto industry.
In the next few weeks, the Federal Reserve will propose new rules for advertising financial products like credit cards and mortgages, especially when it comes to what they have to say. The Federal Reserve will look into how to make it illegal for the financial sector to advertise in ways that are unfair or misleading.
Here is a list of what the Federal Reserve has done and will continue to do to protect consumers from dishonest lenders who take advantage of people who don't know as much.
- Enforcement of consumer protection laws in a coordinated way
Through a joint project with state regulators, the Federal Reserve has been researching, keeping an eye on, and looking into subprime credit card and mortgage lenders. The Federal Reserve is always checking to see if consumer protection laws are being followed. It also looks at the terms under which subprime lenders give loans to people.
This is a great move by the Federal Reserve, because fewer bad loans will be given out as a result.
If you are a subprime consumer, this may sound bad at first, but it is actually a good thing because you won't end up with a line of credit that you can't pay back. You would be much better off not getting credit than trying to pay back a loan you can't afford.
- Efforts to cut down on losses
The Federal Reserve is working with lenders to set rules for reworking loans that are behind and could lead to foreclosure. This will keep the borrower in their home and give the lender a way to keep getting money back on the loan.
Note: If your mortgage is coming up for renewal soon, you may want to be proactive and call your bank as soon as possible to talk about your options so you can stay in your home. There are laws that can help you keep your home and keep you from going bankrupt.
- Rules to protect consumers
The Home Ownership and Equity Protection Act gives the Federal Reserve the power to come up with rules and regulations to stop unfair or misleading advertising, especially to the sub-prime market.
Even though it's nice that the Federal Reserve is looking out for you, you should learn more and be responsible for your own decisions. You will have a much better life if you start learning about money right away and don't take on too much debt.
It's much worse to own a house you can't pay for than to rent an apartment you can pay for. If you live within your means, which means you spend less than you earn, everything will be fine. If you spend more than you can afford, you will feel more stress than you ever want to feel.
How the government is dealing with the subprime lending crisis
In order to stop the shady ways people lend money, Congress is working on a bill to encourage responsible lending. The Mortgage Reform and Anti-Predatory Lending Act of 2007 is one of the things that have been done.
The Mortgage Reform and Anti-Predatory Lending Act of 2007 is a very new law. I think it was passed in October, and there are still some problems that need to be fixed in it. The good news is that there are steps being taken to change the way lending works.
One change that is being thought about for the bill is how loan modifications or "workout plans" are done. Lenders are already reaching out to clients to help them avoid bankruptcy, and it will be interesting to see how the Mortgage Reform Act grows and changes into a law that will help both lenders and borrowers.
Another change is that lenders who continue to use misleading advertising to try to get you to take out a loan will face harsher penalties. By giving companies big fines when they use confusing or deceptive advertising, the financial consequences will definitely help to stop the problem.
The editor-in-chief at Crediteria.com has a few last words.
Even though it's great that laws are being made to help people in the subprime market, it shows that people don't know enough about money.
The main problem is that America doesn't teach people enough about money. People take out bad loans when they would never do so if they were better informed.
It's time for credit cards and loans to be taught in American schools starting at a young age so that future generations don't have to go through what millions of people are going through right now.
If you are a subprime consumer and you are reading this right now, make sure you take responsibility and get the education you need. Think about going to the library and starting to read about how money works. I think that "Rich Dad, Poor Dad" by Robert Kiyosaki is a great place to start learning about money. Robert talks a lot about financial intelligence. He writes in a way that makes it easy for anyone to read and understand.
