WASHINGTON — Faced with a barrage of criticism for weak oversight of the mortgage industry, Federal Reserve officials Wednesday took the unusual step of opening their doors to activists who have protested home foreclosures around the country.
For close to an hour, three dozen members of ACORN -- the Assn. of Community Organizations for Reform Now -- met with Fed Chairman Ben S. Bernanke and Fed Gov. Randall Kroszner in the same conference room where board members set the course of interest rates and debate the health of the U.S. economy.
Although nothing was settled, the meeting reflected the Fed's desire to show heightened concern about lending practices that many blame for the rising tide of defaults and foreclosures. Members of Congress and consumer advocates have been urging the Fed to take a more assertive role in overseeing lenders.
"It's very politically savvy on the part of the Fed" to hold such a meeting, said Howard Glaser, a mortgage industry analyst and former U.S. housing official. "Whether it translates into action remains to be seen."
The Fed is already scrutinizing issues including prepayment penalties, which can make it costly for borrowers to refinance. The Fed is also examining whether lenders are doing enough to ensure that borrowers can fulfill their payment obligations.
It held a hearing on such matters last week and is accepting comments from the public until Aug. 15. Officials could propose stricter standards sometime after that.
Activists said Bernanke and Kroszner listened carefully to their views, without revealing their plans.
"They didn't give us any direct answers on what they were going to do. But they did say they would consider what we were talking about," said Fannie Brown, an ACORN board member from Oakland.
The meeting occurred as the Fed considers whether to be a stricter cop in the mortgage business. Some experts believe that the Home Ownership and Equity Protection Act gives the Feb broad powers to enforce fair practices by all lenders -- not just the banks and savings and loans that regulators have traditionally overseen. Independent lenders and brokers have become important players in the mortgage industry and sold many of the high-cost mortgages that are now failing.
"Use it or lose it," Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, lectured Kroszner at a hearing last week, referring to the Fed's power to supervise fairness in lending. "If the Fed doesn't start to use that authority to roll out the rules, then we'll give it to somebody who will."
