More Regulation of Subprime Lending

The recent events in the mortgage and consumer lending arena have highlighted some of the problems that may arise under the best of circumstances in the context of subprime lending. A combination of inadequate disclosures, questionable practices, and the rise in interest rates has resulted in a market in turmoil. Against this backdrop, there is no question that action of some kind will occur in this area in the near term. Congress is likely to pass legislation that will prohibit certain practices, provide for foreclosure prevention, and regulate the activities of mortgage brokers. The states will continue to enact laws that impose additional obligations on lenders. The federal banking agencies will focus attention both in the compliance and the safety and soundness areas. The result of this activity is that insured depositories that are already regulated and supervised in this area will have additional scrutiny. Reputation, legal, and regulatory risks will need to be identified and addressed.