We’ve been buried under a tidal wave of bad real estate news especially down here in the Sunshine State.  Every day it’s this lender or that lender reporting massive losses as a result of laissez-faire (nay reckless) lending practices.  You can’t drive down a street without seeing one or two for sale signs, most of which have been put up by desperate owners that are straddling the line.  Foreclosure rates in counties like St. Lucie are through the roof.  So I had to chuckle when yesterday I read that the Fed was going to FINALLY adopt new rules for lending.  What are these new rules? 

Under the proposal unveiled last December, the rules would restrict lenders from penalizing risky borrowers who pay loans off early, require lenders to make sure these borrowers set aside money to pay for taxes and insurance and bar lenders from making loans without proof of a borrower’s income. It also would prohibit lenders from engaging in a pattern or practice of lending without considering a borrower’s ability to repay a home loan from sources other than the home’s value.

“These new rules … will address some of the problems that have surfaced in recent years in mortgage lending, especially high-cost mortgage lending,” Bernanke said.

Profound stuff, isn’t it?  Makes you want to reach out and smack Ben on the forehead like the hapless dupes in those V8 commercials, doesn’t it?  Imagine, they came up with this “novel approach” to lending in December, and are just now getting around to voting on whether or not to approve these “strict” standards.  I know that some of my brethren in the business will scream about how this will limit customer choice, but I just don’t buy the argument.  We’ve played fast and loose with this economy for too long.  The sharks that got fat off of the loans that are most grievous have had their day in the sun and should move on to the next “sure” thing.  I’m of the opinion that if this is as far as the new regulations will go, banks and brokers should count their blessings. 

On a positive note… building starts will continue to decline, inventories will dwindle and we’ll do what we do best in this county… consume our way out of a tight situation.  Yet, we should understand that to this point we have managed to dodge a bullet… and we best not forget it.