The Federal Reserve Board's revised banking regulations will forbid lenders from offering mortgages to would-be homebuyers who have no proof of income or who cannot afford to pay insurance and real estate taxes. Banks will be obliged to offer early payment plans. CNBC's economist Steve Liesman told NBC anchor Brian Williams that "$1.5tr worth of subprime mortgages later" regulators "are finally getting around to really clamping down on the abuses in predatory lending." The new rules also bring an end to junk fax offering discount loans.
Betsy Stark took A Closer Look for ABC at lenders who have already taken out a subprime mortgage and are looking to refinance it to avoid eviction from a foreclosed property. She followed Denise Carruth, a Sacramento homeowner, who took out of loan from BNC, which sold the paper to Aurora Loan Services. Aurora could not renegotiate because it was "unable to locate an account number under the name and address provided." It turned out Aurora had sold the loan on to Sale 2005-11, a Wall Street investment trust. "It does not take calls from homeowners."
The final week of November saw the schoolteachers of Jefferson County Fla facing financial crisis. The school district was suddenly unable to make payroll because the county's funds were invested in a pool run by the state, CBS' Kelly Cobiella explained. "Florida is one of 45 states that offer investment pools to local governments as a safe way to earn interest on their cash"--except safe it was not. November 29th, Black Thursday, saw a crash in the value of its real-estate-backed assets, which were tied to subprime mortgages. Now the school district's advisors have called the investments worthless--it "may have to swallow the loss."
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