New Federal Rules on Subprime Loans Issued

Federal bank regulators have released a "guidance" telling issuers of subprime loans that they need to change the way they offer mortgages to borrowers with poor credit.

From now on, lenders who offer adjustable rate mortgages will have to consider whether the borrower can afford the higher payment that results when interest rates go up.

Currently, some lenders are basing lending decisions on the "teaser" rate, and not on where the rate might go.

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