WASHINGTON, DC B During a hearing before the Senate Banking Committee today, U.S. Senator Herb Kohl urged the Chairman of the Federal Reserve, Ben Bernanke, to protect prospective homebuyers from unscrupulous lending practices in the mortgage market. Chairman Bernanke testified before the Banking Committee, on which Kohl serves, during a hearing on U.S. monetary policy. Kohl said that there must be steps taken to enforce compliance of new, stricter regulations by mortgage lenders who are not routinely examined by federal regulators.

“One of the biggest problems that got us into this mess is that homebuyers were receiving loans they could not afford from unsupervised lenders,” Kohl said during the hearing. “Most of these lenders were overseen at the state level.”

         Last year, the Federal Reserve finalized rules to better protect homebuyers from unfair and deceptive practices in the mortgage market will take effect in October, 2009. Kohl said that, while these new rules will apply to all mortgage lenders, those who are not routinely subject to federal oversight might not adhere to the new rules as closely as federally insured financial institutions.

         “What steps is the Federal Reserve taking to ensure full understanding and compliance with the new regulations by mortgage lenders which are not routinely examined by federal regulators?” Kohl asked Bernanke.

         Chairman Bernanke indicated that efforts are being made to address the existing “mismatch” in regulatory and enforcement authority. He discussed outreach efforts being made by federal authorities, including joint assessments with state bank supervisors and various state regulators. Chairman Bernanke said there would be continued work to establish consistency in state and federal oversight, despite varying state authorities and resources, and that Congress would need to address these gaps in oversight as part of financial regulatory reform.

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