New Lending Rules Effective Immediately
WILLIS: Well, say it ain't so, joe. An American icon, the king of beer, is being sold to a foreign company. Anheuser-Busch has agreed to a $52 billion takeover bid from the Belgian brewer InBev. Now the deal heads off what was shaping up to be a bitter fight for the maker of Budweiser and Bud Light beers. Instead, the agreement creates the worlds' largest brewer and the fourth largest consumer product company Anheuser-Busch InBev. It's not immediately clear just how long approval of the deal will take.</s>VELSHI: Well, what a day for the Federal Reserve to unveil now lending rules. Nice timing. But that's exactly what happened. New rules overhauling mortgage lending. Jennifer Westhoven is here to explain them and how they can have an impact on you. And these aren't just some kind of rules. These are the ones that would have prevented the mess that we're in had they been in place five years ago or 10 years ago.</s>JENNIFER WESTHOVEN, CNN CORRESPONDENT: I mean, in a way, this story is getting overshadowed by these big problems that we're having. But this goes right to the source of most of these problems that we've been talking about all day. It's a preventative medicine. How do we prevent another housing crisis? So the Fed wants to put the brakes on the loose lending that got us into this mess, right. Got people in over their head. Many people losing their homes. The new rules cover nearly all subprime loans. Now brokers would have to take assets and income into account. They can't ignore them and just base the loan on the value of the home. Right, that was betting that the home value . . .</s>VELSHI: Which is part of what IndyMac was doing and part of what these ninja (ph) loans you told us about, no income, no jobs, no assets. You get a loan without even verifying any of that.</s>WESTHOVEN: Yes, and they were just betting that the house value would keep going up. So everything was kind of pyramiding up. That doesn't work. They also have to stop misleading advertising and there is going to be a banning of some prepayment penalties. You know people who want to pay off their loans early while the rates are low. Then they got socked with these huge fees so they really couldn't do it. They were locked into the huge interest payments. There's a lot of debate about this. You know, is it the buyers who were irresponsible? Is it that brokers were unscrupulous? Bernanke is very clear that unscrupulous brokers did do some damage here. He said, "although the high rate of delinquency has a number of causes, it seems clear that unfair or deceptive acts and practices by lenders resulted in the extension of many loans, particularly high- cost loans, that were inappropriate for or misled the borrower." And I think it's very clear from some of the people, the letters we get, that they were mislead. There were seven misleading practices that are banned. We'll do a few of them here. One is, chorusing a real estate appraiser to fudge a home's value. People were really doing this. Also, you know, a lender has to make a credit when they receive a payment. You imagine you send in your payment and then they kind of say, well, we haven't processed it. You still get hit with a huge late fee. They pile up. That's not fair. And one that's really I think the most obvious if you go out and apply was in three days you'll get a schedule of what all the costs would be for the loan and what your payments would look like in the future.</s>VELSHI: So you're not finding that out right before you sign your documents.</s>WESTHOVEN: Exactly. Or even some people said, you know, my broker said it would only go up to 22. It went up to 3,000 and, you know, they couldn't handle that.</s>VELSHI: All right. And these rules are going to apply to all lenders.</s>WESTHOVEN: Yes. And that's a big deal because before it was just those that were basically supervised through the FDIC. So a lot of people didn't have to play by the rules.</s>VELSHI: All right. Good information. Get to know those rules if you're planning to buy a house or, frankly, if you're going to sell one -- Gerri.</s>WILLIS: Well, we haven't forgotten about gas prices today. The latest on record prices at the pump. Plus, chances are you have lots of questions about Freddie, Fannie, IndyMac, your money. The Help Desk is going to tackle them all. We're all over issue #1 right here on CNN.