(EMAILWIRE.COM, December 20, 2007 ) Agawam, MA - Thursday, December 20, 2007 – Earlier this week, the Federal Reserve proposed measures to control abusive lending practices. Most of the intended reforms address issues that directly affect sub-prime mortgages, which account for 25% of all home loans. The Federal Reserve also provided a definition for what it considers to be a sub-prime loan, determining them to be “first-lien mortgages that carry interest rates that are three percentage points higher than the yield on comparable Treasury securities.”

Perhaps the most interesting measure proposed would prohibit lenders from extending financing without fully considering the borrower’s ability to repay. In an effort to avoid a recurrence of the current situation, in which thousands of adjustable rate mortgage holders are facing foreclosure as their teaser rates expire, lenders will be required to determine a borrower's ability to repay based on the reset rate, as opposed to the much lower initial rate.

“It has baffled many in the credit counseling industry why anyone would base a mortgage lending decision on someone’s gross income, since that amount is never actually available to them when it comes to paying bills,” observed Christopher Viale, President and CEO of Cambridge Credit Counseling Corp. “Placing the burden on lenders to gauge a consumer’s ability to repay is a step in the right direction toward more responsible lending practices nationwide.”

Other notable provisions affecting sub-prime loans include:
· Abolishing loans that do not verify income
· Restricting pre-payment penalties
· Allowing escrow accounts for periodic tax and insurance payments

Also under consideration is a prohibition on misleading or deceptive advertising within the mortgage industry. Advertisers would be required to prominently display all applicable rates and fees associated with their products.

Before taking effect, the public will have the opportunity to comment and suggest revisions, then the rules must be voted on again. If the proposals are accepted, the new provisions could be in place within 90 days.

“The Reserve Board’s measures are admirable, but more needs to be done to educate the public about personal finance,” according to Viale. “Without a fundamental understanding of credit, debt and proper money management, American consumers will continue to be preyed on by unscrupulous lenders.”

Cambridge Credit Counseling recommends that anyone in the process of looking for a mortgage or other substantial financing first contact their local credit counseling agency for relevant information to help them in their decision-making process. Cambridge offers a host of financial literacy materials on its financial wellness website, www.goodpayer.com.

ABOUT CAMBRIDGE CREDIT COUNSELING CORP.
Cambridge Credit Counseling Corp. is a professional debt counseling agency dedicated to educating young adults on the importance of sound financial management and providing financially distressed Americans with education and debt management services appropriate to their needs. For more information on this article or to schedule an interview, please call 413-821-6919.

Visit Cambridge Credit Counseling Corp. online at www.cambridgecredit.org. To learn more about Cambridge Credit Counseling Corp. and the community, please visit www.youtube.com/CambridgeCredit. For more helpful information, check out the Cambridge Credit Counseling Corp. Financial Literacy blog at www.cambridgecredit.blogspot.com.

###

Contact: Thomas Fox
Cambridge Credit Counseling Corp.
413.821.6919
tfox@cambridgecredit.org

Contact Information:
Cambridge Credit Counseling Corp.
Thomas Fox
Tel: 413.821.6919
Email us


This is a press release. Press release distribution and press release services by EmailWire.Com: http://www.emailwire.com/us-press-release-distribution.php.