efficient, when accurate information is available to all participants. information helps consumers by improving their ability to compare mortgage products and to choose those that will help them meet their personal goals. we are keenly aware, however, of the substantial volume of disclosures and other documents that mortgage lending already entails, and we are sensitive to the risk that too much information may be of practically as little value to many consumers as no information at all. accordingly, we intend to consider mortgage disclosures comprehensively, with an eye to improving their usefulness to consumers, while remaining mindful of the total burden for industry. perhaps most importantly, we will engage in extensive consumer testing of mortgage disclosures, to ensure that disclosures provide information that consumers can readily use. our goal is better disclosures, not necessarily more disclosures. we also recognize that disclosures may not always be sufficient to combat abusive practices. because some bad lending practices may require additional measures, the federal reserve will seriously consider how we might use our rulemaking authority to address abusive practices without restricting consumers'access to beneficial financing options and responsible subprime credit. in addition to improved disclosures, regulations that restrict or prohibit practices that are " unfair or deceptive " may also be necessary. we have heard concerns about consumers being steered into mortgages they cannot afford and of repeated refinancings involving closing costs that strip away a borrower's home equity. today, we will gather information on how we might craft rules to stop such abusive practices. we also will seek information from state officials regarding their experiences with drafting laws and rules to combat predatory lending efficiently and effectively. during today's hearing, we will seek information from panelists on certain specific questions. i would like to close by briefly touching on some of those. there are four terms or practices that have been most frequently cited as troublesome in the mortgage market, especially the subprime and home equity markets. they are : • prepayment penalties, • failure to require escrows for taxes and insurance, • stated income and low - documentation lending, and • failure to give adequate consideration to a borrower's ability to repay a loan. at least some of these practices can be beneficial to at least some consumers. for example, an informed borrower might choose a loan with a prepayment penalty in exchange for a lower interest rate or lower closing costs. on the other hand, prepayment penalties also can be abusive, such as when a borrower

randall s kroszner : encouraging responsible mortgage lending – prospective rulemaking initiatives remarks by mr randall s kroszner, member of the board of governors of the us federal reserve system, at the public hearing under the home ownership and equity protection act ( hoepa ), federal reserve board, washington dc, 14 june 2007. * * * i am pleased to be here today to chair the federal reserve board's public hearing under the home ownership and equity protection act ( hoepa ). the hearing will focus specifically on how the board might use its rulemaking authority under hoepa to address concerns about abusive mortgage lending practices. in the course of this hearing, we will hear from key players in the home mortgage market : lenders, brokers, secondary market participants, consumer advocacy and community development organizations, academics and researchers, and state regulators. although they play different roles, all share a common goal : encouraging responsible mortgage lending for the benefit of individual consumers and the american economy as a whole. the congress enacted hoepa in 1994 in response to concerns about abusive lending in the home equity market, and the federal reserve board was given broad authority to implement its provisions and to adopt regulations that the board finds to be necessary and proper to effectuate its purposes. in addition, the board has the responsibility to prohibit acts or practices it finds unfair or deceptive, or otherwise designed to evade hoepa. the board understands its rulemaking responsibility under hoepa but is not alone in facing the important task of preventing unfair and deceptive practices. other regulators share in our responsibility to ensure responsible mortgage lending through enforcement powers. the states have extensive regulatory authority – and responsibility – under their own anti - predatory lending statutes, various other relevant legal authorities, and especially their mortgage industry licensing acts – which give them considerable control over the activities of mortgage brokers and lenders. many of the states, including notably those that are represented on this afternoon's panel, have been very active in reining in bad actors in their mortgage markets. the ftc also shares in our enforcement responsibilities under hoepa and other federal laws. finally, the other federal financial regulatory agencies each have a duty to enforce federal consumer protection laws, including hoepa, with respect to the depository institutions under their respective supervisory ambits. in light of the sheer magnitude of the task, we are very pleased that these regulators all contribute to the goal of ensuring a healthy, competitive, and responsible mortgage