U.S. Regulators Urge Scrutiny of Subprime Mortgages (Jesse Westbrook)

  Lawmakers are concerned that aggressive lending, rising interest rates and falling home prices have put more borrowers at risk of losing their homes.

  By Jesse Westbrook

  March 2 (Bloomberg) -- Mortgage lenders should more closely scrutinize underwriting standards and make fuller disclosure to consumers with poor credit who hold certain subprime loans, U.S. banking regulators said.

  The Federal Deposit Insurance Corp., Federal Reserve Board and other regulators issued guidelines today in Washington urging lenders to provide more information about the risks of adjustable-rate mortgages to subprime borrowers.

  ``The interagency statement proposes practices and principles to limit risks to both the borrower and the lending institution,'' Federal Reserve Governor Randall Kroszner said in an e-mailed statement. Kroszner's statement addresses ways lenders ``can provide subprime borrowers with clear and balanced information on the risks associated with these loans.''

  The statement reflects regulators' sensitivity to the recent turmoil in the subprime mortgage market, where borrowers with weak credit are subject to higher interest rates. Late payments on bank mortgages climbed last quarter to the highest level in four years, and more than 20 lenders have been closed or sold since the beginning of 2006.

  Senator Christopher Dodd, chairman of the Senate Banking Committee Chairman, told Federal Reserve Chairman Ben Bernanke at a hearing last month that regulators weren't doing enough to protect consumers from deceptive mortgage practices. Lawmakers are concerned that aggressive lending, rising interest rates and falling home prices have put more borrowers at risk of losing their homes.

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