The rules require lenders to verify borrowers' ability to repay the loan by any means other than selling the home. All loans to individuals who do not provide documents confirming their income will be prohibited. Prepayment penalties are also banned, except in certain special cases. Finally, the lender must open a special account with a third party to collect property tax and homeowners insurance from the borrower. The borrower can close this account only one year after the loan is issued.
The Democratic majority in Congress criticized the Fed for indecisiveness. Opposition lawmakers believe the new rules come too late to save many homeowners. Moreover, Democrats argue that focusing solely on the risky loan market is pointless since it has already shrunk significantly.
Democrats, led by Lawrence Summers, former Treasury Secretary under President Bill Clinton, propose more radical ways to overcome the credit crisis, particularly government stimulus of general tax cuts totaling $50 to $70 billion. Recall that on December 18, the European Central Bank followed this path, issuing short-term loans to European banks totaling over $500 billion to fill the market with liquidity.
According to Lenta.ru, the mortgage crisis began unfolding in the US as early as 2006, but gained full force in late summer of this year. The payment crisis in the US mortgage market spread to the entire banking system of Europe and the US. Banks and investment funds were forced to write down tens of billions of dollars in assets. To revive the market, central banks in Europe, the US, and Japan injected hundreds of billions.